Big Lots' stock tumbles toward 32-year low after losses nearly double forecasts, dividend is suspended
By Tomi Kilgore
Same-store sales fall more than expected, and the outlook for the current quarter is downbeat
Shares of Big Lots Inc. tumbled Friday, toward the lowest prices seen in 32 years, after the discount home essentials retailer reported a much wider-than-expected fiscal first-quarter loss and said it will suspend its dividend to bolster liquidity.
The company also reported sales that fell more than forecast, citing furniture product shortages and bad weather, and as macroeconomic challenges hurt lower-income consumers.
The stock (BIG) sank 11.0% in morning trading, which puts it on track for the lowest close since Dec. 27, 1991.
Net losses for the quarter to April 29 swelled to $206.1 million, or $7.10 a share, from $11.1 million, or 39 cents a share, in the year-ago period. Excluding nonrecurring items, the adjusted per-share loss of $3.40 was nearly double the FactSet loss consensus of $1.78.
Sales fell 18.3% to $1.12 billion, below the FactSet consensus of $1.19 billion, as the 18.3% decline in same-store sales was much more than expectations of a 13.2% drop.
"[O]ur lower-income consumer was hurt by inflation, lower tax refunds, and higher interest rates, and their confidence has been shaken by banking failures," said Chief Executive Officer Bruce Thorn.
Also hurting sales were furniture product shortages, especially in Broyhill upholstery, due to the "abrupt closure" of the company's largest vendor, United Furniture Industries, in November. Seasonal lawn and garden sales were also hurt by unfavorable weather.
Thorn said the sales challenges were addressed with increased markdown and promotional activity, which in turn hurt gross margins but helped reduce inventory.
Gross margin for the first quarter contracted to 34.9% from 36.7% a year ago, while the value of inventories fell 18.8% to $1.09 billion.
The company said it was being "very aggressive" in how it manages its business during the current difficult environment, including raising its cost-cutting target to over $100 million in 2023 from the expected savings of $70 million announced earlier this year. The company has also identified more than $200 million of opportunities to boost the bottom line over the next 18 months.
"We are also highly focused on ensuring we have plenty of liquidity to get through this period of macroeconomic challenges," Thorn said. "In addition to cost and inventory reduction efforts, these actions include expected further asset monetization of approximately $340 million, and the decision made by our Board of Directors this week to suspend our dividend."
The company had last paid a quarterly dividend of 30 cents a share in March, which marked the 33rd consecutive quarter the company paid a dividend, starting in July 2014. The implied dividend yield as of Thursday's stock closing price was 16.64%, which is roughly 10 times the implied yield for the S&P 500 index of 1.65%.
For the second quarter, the company expects same-store sales to be down in the "high-teens" percentage range, compared with the current FactSet consensus of down 8.6%.
The company didn't provide full-year guidance, given "significant uncertainty" in the macroeconomic environment, but did say it expects sales and gross margin momentum to be weighted toward the back half of the year.
Thorn said he was "highly encouraged by the green shoots we are seeing" from efforts to turn the business.
"[W]e are confident that these headwinds will abate, and that when they do, we will see a major boost to our business," Thorn said. "In particular, we expect furniture and seasonal to return to being the strong growth drivers for our business they have been in the past, as consumer confidence improves and as we continue to bring newness and incredible value to our assortment."
The stock has tumbled 56.3% year to date, while the SPDR S&P Retail exchange-traded fund (XRT) has lost 3.9% and the S&P 500 has gained 9.0%.