Q1 comparable sales and gross margins decline
due to challenging macro environment and vendor disruption;
operating expenses, excluding adjustments, better than
expected
Q1 GAAP EPS loss of $7.10; adjusted EPS loss of $3.40
External partner engagement has identified
over $200 million of bottom-line
opportunities across gross margin and SG&A over the next 18
months; opportunities are in addition to $100 million of structural SG&A savings, as
well as significant inbound freight savings identified for
2023
Q1 inventory down approximately in line with
sales; strengthening liquidity through expected asset monetization
of approximately $340 million,
suspension of dividend, and other actions
Expect to drive significant business
improvements in the back half of 2023 as we deliver more newness
and incredible value across our assortment
Furniture and seasonal to return to being
strong growth drivers for the business as consumer confidence
improves
For the Q1 Results Presentation, Please
Visit:
https://www.biglots.com/corporate/investors
COLUMBUS, Ohio, May 26, 2023
/PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported a net
loss of $206.1 million, or
$7.10 per share, for the first
quarter of fiscal 2023 ended April 29,
2023. This result includes a net after-tax charge of
$107.4 million, or $3.70 per share, associated with the net impact
of synthetic lease exit costs, forward distribution center closure
costs, store asset impairment charges, and a gain on the sale of
real estate and related expenses. Excluding this charge, the
adjusted net loss in the first quarter of 2023 was $98.7 million, or $3.40 per share (see non-GAAP table included
later in this release). The net loss for the first quarter of
fiscal 2022 was $11.1 million, or
$0.39 per share.
Net sales for the first quarter of fiscal 2023 totaled
$1.124 billion, an 18.3% decrease
compared to $1.375 billion for the
same period last year. The decline to last year was driven by a
comparable sales decrease of 18.2%. We estimate comparable sales
were adversely impacted by approximately 300 basis points due to
product shortages in furniture, resulting from the unexpected
closure of our largest vendor in November
2022. This impact excludes the attachment impact on adjacent
categories, such as soft home. A net decrease in store count,
partially offset by new stores and relocations, contributed
approximately 10 basis points of sales decline compared to the
first quarter of 2022.
Commenting on today's results announcement, Bruce Thorn, President and CEO of Big Lots
stated, "Macro-economic headwinds have created significant
challenges for us, which are reflected in our results and outlook.
But we are confident that these headwinds will abate, and that when
they do, we will see a major boost to our business. 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."
While we navigate through this difficult environment, we are
being very aggressive in how we are managing our business. We
are significantly raising our SG&A savings target to over
$100 million in 2023, and have
identified over $200 million of
bottom-line opportunities across gross margin and SG&A we will
be pursuing over the next 18 months. Further, we are highly
encouraged by the green shoots we are seeing as we work to turn the
business. Notably, as a result of our efforts to introduce more
bargains and treasures, marketing them better, and serving our
customers well, the reactivation of lapsed customers was
strong in Q1, up 9%.
We are also highly focused on ensuring we have plenty of
liquidity to get through this period of macroeconomic challenges.
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."
"Turning to Q1 results, our lower-income consumer was hurt by
inflation, lower tax refunds, and higher interest rates, and their
confidence has been shaken by banking failures. Further, we
continue to cycle the pull forward of higher-ticket purchases
during the pandemic. In addition to these macroeconomic factors,
our furniture sales, especially Broyhill upholstery, continued to
be adversely impacted by product shortages related to the abrupt
closure of our largest vendor, while Seasonal lawn and garden was
affected by unfavorable weather. We addressed these sales
challenges quickly with increased markdown and promotional activity
which hurt our gross margins, but successfully brought our
year-over-year inventories down approximately in line with the
sales decline. We also tightly managed costs, with SG&A that
came in better than our guidance."
"We are making good progress in our efforts to accelerate the
mix of bargains and treasures, while making them easier to find and
more convenient to purchase. Combined with a focus on improving
productivity, making disciplined investment decisions, and seizing
opportunities from distressed competitors, I am confident that as
we pass through this challenging period, we will emerge as a
significantly stronger company."
A summary of adjustments to loss per diluted share is included
in the table below.
|
|
|
Q1 2023
|
Earnings (loss) per
diluted share - as reported
|
($7.10)
|
|
|
Adjustment to exclude
net impact of synthetic lease
exit costs, forward distribution center contract
termination costs, store asset impairment charges,
and a gain on the sale of real estate and related
expenses (1)
|
$3.70
|
Earnings (loss) per
diluted share – adjusted basis
|
($3.40)
|
|
|
(1) Non-GAAP
detailed reconciliation provided in statement below
|
Asset Monetization Update
Regarding asset monetization, on May 24,
2023, the company entered into a letter of intent for a sale
and leaseback of the Apple Valley,
California, distribution center; corporate headquarters
building in Columbus, Ohio; and
most of the remaining owned stores. The value of the transaction is
expected to be $340 million, or
$240 million in net proceeds after
considering the $100 million balance
remaining on synthetic lease for the Apple Valley, California distribution center,
which would be used to pay down debt under the Asset-Based Lending
Facility. Due to available net operating losses, taxes on the gain
on sale of the assets are expected to be minimal. The closing date
is expected to be late in the second quarter or early in the third
quarter of fiscal 2023, and the transaction is subject to customary
due diligence and execution of a definitive purchase and sale
agreement with standard closing conditions.
Inventory and Cash Management
Inventory ended the first quarter of fiscal 2023 at $1.088 billion compared to $1.339 billion for the same period last year,
with the 18.8% decrease driven by lower in-transit inventory and
on-hand units.
The company ended the first quarter of fiscal 2023 with
$51.3 million of Cash and Cash
Equivalents and $501.6 million of
Long-term Debt under its $900 million
asset-based lending facility, compared to $61.7 million of Cash and Cash Equivalents and
$270.8 million of Long-term Debt as
of the end of the first quarter of fiscal 2022.
Dividend and Share Repurchases
On May 23, 2023, the Board of
Directors declared a suspension of the dividend. The company did
not execute any share repurchases during the quarter. The company
has $159 million remaining under its
December 2021 $250 million authorization.
Company Outlook
For the second quarter, the company expects comps to be down in the
high-teens range, similar to Q1. Net new stores will add about 30
basis points of growth versus 2022. The company expects the second
quarter gross margin rate to slightly improve versus the prior
year, but remain in the low-30s range driven by significant
markdowns on slow-moving seasonal merchandise. The company is not
providing EPS guidance at this point. The company expects a share
count of approximately 29.3 million for Q2.
With regard to the full year, sales and gross margin momentum
will be weighted towards the back half of the year, as key actions
to improve the business gain traction, and as cost reductions,
including freight, continue to be realized. Given significant
uncertainty in the macroeconomic environment, at this point the
company is not providing formal full year guidance.
Conference Call/Webcast
The company will host a conference call today at 8:00 a.m. ET to discuss the financial results for
the first quarter of fiscal 2023. A webcast of the conference call
is available through the Investor Relations section of the
company's website http://www.biglots.com. An archive of the call
will be available through the Investor Relations section of the
company's website http://www.biglots.com/ after 12:00 p.m. ET today and will remain available
through midnight ET on Friday, June
9, 2023. A replay of this call will also be available beginning
today at 12:00 p.m. ET through
June 9 by dialing 877.660.6853 (Toll
Free) or 201.612.7415 (Toll) and entering Replay Conference ID
13738614.
About Big Lots
Headquartered in Columbus,
Ohio, Big Lots, Inc. (NYSE: BIG) is one of America's
largest home discount retailers, operating more than 1,420 stores
in 48 states, as well as a best-in-class ecommerce platform with
expanded fulfillment and delivery capabilities. The Company's
mission is to help customers "Live Big and Save Lots" by offering
unique treasures and exceptional bargains on everything for their
home, including furniture, seasonal decor, kitchenware, pet
supplies, food items, laundry and cleaning essentials and more. Big
Lots is the recipient of Home Textiles Today's 2021 Retail Titan
Award. For more information about the company or to find the store
nearest you, visit biglots.com.
Cautionary Statement Concerning Forward-Looking
Statements
Certain statements in this release are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and such statements are
intended to qualify for the protection of the safe harbor provided
by the Act. The words "anticipate," "estimate," "continue,"
"could," "approximate," "expect," "objective," "goal," "project,"
"intend," "plan," "believe," "will," "should," "may," "target,"
"forecast," "guidance," "outlook" and similar expressions generally
identify forward-looking statements. Similarly, descriptions of our
objectives, strategies, plans, goals or targets are also
forward-looking statements. Forward-looking statements relate to
the expectations of management as to future occurrences and trends,
including statements expressing optimism or pessimism about future
operating results or events and projected sales, earnings, capital
expenditures and business strategy. Forward-looking statements are
based upon a number of assumptions concerning future conditions
that may ultimately prove to be inaccurate. Forward-looking
statements are and will be based upon management's then-current
views and assumptions regarding future events and operating
performance and are applicable only as of the dates of such
statements. Although we believe the expectations expressed in
forward-looking statements are based on reasonable assumptions
within the bounds of our knowledge, forward-looking statements, by
their nature, involve risks, uncertainties and other factors, any
one or a combination of which could materially affect business,
financial condition, results of operations or liquidity.
Forward-looking statements that we make herein and in other
reports and releases are not guarantees of future performance and
actual results may differ materially from those discussed in such
forward-looking statements as a result of various factors,
including, but not limited to, the current economic and credit
conditions, inflation, the cost of goods, our inability to
successfully execute strategic initiatives, competitive pressures,
economic pressures on our customers and us, the availability of
brand name closeout merchandise, trade restrictions, freight costs,
the risks discussed in the Risk Factors section of our most recent
Annual Report on Form 10-K, and other factors discussed from time
to time in other filings with the SEC, including Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K. This release should
be read in conjunction with such filings, and you should consider
all of these risks, uncertainties and other factors carefully in
evaluating forward-looking statements.
You are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date they are made. We
undertake no obligation to publicly update forward-looking
statements, whether as a result of new information, future events
or otherwise. You are advised, however, to consult any further
disclosures we make on related subjects in our public announcements
and SEC filings.
BIG LOTS, INC. AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
APRIL
29
|
|
APRIL
30
|
|
|
|
|
|
2023
|
|
2022
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$51,320
|
|
$61,707
|
|
|
|
Inventories
|
|
1,087,656
|
|
1,338,737
|
|
|
|
Other current
assets
|
|
88,887
|
|
125,362
|
|
|
|
Total
current assets
|
|
1,227,863
|
|
1,525,806
|
|
|
|
|
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
1,554,158
|
|
1,729,053
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment - net
|
|
644,226
|
|
749,416
|
|
|
|
|
|
|
|
|
|
|
Deferred income
taxes
|
|
121,926
|
|
10,199
|
|
|
Other
assets
|
|
39,797
|
|
37,283
|
|
|
|
|
|
$3,587,970
|
|
$4,051,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$316,900
|
|
$488,524
|
|
|
|
Current operating
lease liabilities
|
|
254,448
|
|
233,683
|
|
|
|
Property, payroll
and other taxes
|
|
72,805
|
|
95,920
|
|
|
|
Accrued operating
expenses
|
|
127,440
|
|
121,977
|
|
|
|
Insurance
reserves
|
|
35,321
|
|
36,227
|
|
|
|
Accrued salaries and
wages
|
|
26,100
|
|
24,745
|
|
|
|
Income taxes
payable
|
|
918
|
|
1,325
|
|
|
|
Total
current liabilities
|
|
833,932
|
|
1,002,401
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
501,600
|
|
270,800
|
|
|
|
|
|
|
|
|
|
|
Noncurrent operating
lease liabilities
|
|
1,509,454
|
|
1,577,932
|
|
|
Deferred income
taxes
|
|
0
|
|
22,854
|
|
|
Insurance
reserves
|
|
58,224
|
|
59,847
|
|
|
Unrecognized tax
benefits
|
|
8,372
|
|
10,623
|
|
|
Other
liabilities
|
|
125,029
|
|
126,972
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
551,359
|
|
980,328
|
|
|
|
|
|
$3,587,970
|
|
$4,051,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BIG LOTS, INC. AND
SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(In thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 WEEKS
ENDED
|
|
13 WEEKS
ENDED
|
|
|
|
|
APRIL 29,
2023
|
|
APRIL 30,
2022
|
|
|
|
|
|
%
|
|
|
%
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$1,123,577
|
100.0
|
|
$1,374,714
|
100.0
|
|
|
Gross
margin
|
|
392,469
|
34.9
|
|
504,594
|
36.7
|
|
|
Selling and
administrative expenses
|
|
617,066
|
54.9
|
|
480,779
|
35.0
|
|
|
Depreciation
expense
|
|
36,582
|
3.3
|
|
37,356
|
2.7
|
|
Operating
loss
|
|
(261,179)
|
(23.2)
|
|
(13,541)
|
(1.0)
|
|
|
Interest
expense
|
|
(9,149)
|
(0.8)
|
|
(2,750)
|
(0.2)
|
|
|
Other income
(expense)
|
|
5
|
0.0
|
|
1,040
|
0.1
|
|
Loss before income
taxes
|
|
(270,323)
|
(24.1)
|
|
(15,251)
|
(1.1)
|
|
|
Income tax
benefit
|
|
(64,250)
|
(5.7)
|
|
(4,169)
|
(0.3)
|
|
Net
loss
|
|
($206,073)
|
(18.3)
|
|
($11,082)
|
(0.8)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
common share
|
|
|
|
|
|
|
|
|
Basic
|
|
($7.10)
|
|
|
($0.39)
|
|
|
|
Diluted
|
|
($7.10)
|
|
|
($0.39)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
29,018
|
|
|
28,621
|
|
|
|
Dilutive effect of
share-based awards
|
|
-
|
|
|
-
|
|
|
|
Diluted
|
|
29,018
|
|
|
28,621
|
|
|
Cash dividends declared per common share
|
|
$0.30
|
|
|
$0.30
|
|
|
|
|
|
|
|
|
|
|
|
BIG LOTS, INC. AND
SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
13 WEEKS
ENDED
|
|
13 WEEKS
ENDED
|
|
|
|
|
|
APRIL 29,
2023
|
|
APRIL 30,
2022
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
Net cash used in
operating activities
|
|
($168,938)
|
|
($196,233)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used
in investing activities
|
|
(12,481)
|
|
(41,241)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by financing activities
|
|
188,009
|
|
245,459
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and
cash equivalents
|
|
6,590
|
|
7,985
|
|
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
Beginning of
period
|
|
44,730
|
|
53,722
|
|
|
|
End of
period
|
|
$51,320
|
|
$61,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BIG LOTS, INC. AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(In thousands, except per share
data)
(Unaudited)
The following tables reconcile: selling and administrative
expenses, selling and administrative expense rate, depreciation
expense, depreciation expense rate, operating loss, operating loss
rate, income tax benefit, effective income tax rate, net loss, and
diluted earnings (loss) per share for the first quarter of 2023
(GAAP financial measures) to adjusted selling and administrative
expenses, adjusted selling and administrative expense rate,
adjusted depreciation expense, adjusted depreciation expense rate,
adjusted operating loss, adjusted operating loss rate, adjusted
income tax benefit, adjusted effective income tax rate, adjusted
net loss, and adjusted diluted earnings (loss) per share (non-GAAP
financial measures).
First Quarter
of 2023 - Thirteen weeks ended April 29, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
Adjustment to
exclude synthetic lease exit costs and related
expenses
|
|
Adjustment to
exclude forward distribution center ("FDC") contract termination
costs and related expenses
|
|
Adjustment to
exclude store asset impairment charges
|
|
Adjustment to
exclude gain on sale of real estate and related
expenses
|
|
As
Adjusted
(non-GAAP)
|
Selling and
administrative expenses
|
$
617,066
|
|
$
(53,567)
|
|
$
(8,624)
|
|
$
(83,808)
|
|
$
3,799
|
|
$ 474,866
|
Selling and
administrative expense rate
|
54.9 %
|
|
(4.8 %)
|
|
(0.8 %)
|
|
(7.5 %)
|
|
0.3 %
|
|
42.3 %
|
Depreciation
expense
|
|
36,582
|
|
-
|
|
(993)
|
|
-
|
|
-
|
|
35,589
|
Depreciation
expense rate
|
|
3.3 %
|
|
-
|
|
(0.1 %)
|
|
-
|
|
-
|
|
3.2 %
|
Operating
loss
|
|
(261,179)
|
|
53,567
|
|
9,617
|
|
83,808
|
|
(3,799)
|
|
(117,986)
|
Operating loss
rate
|
|
(23.2 %)
|
|
4.8 %
|
|
0.9 %
|
|
7.5 %
|
|
(0.3 %)
|
|
(10.5 %)
|
Income tax
benefit
|
|
(64,250)
|
|
13,813
|
|
2,480
|
|
20,443
|
|
(899)
|
|
(28,413)
|
Effective
income tax rate
|
|
23.8 %
|
|
(0.6 %)
|
|
(0.1 %)
|
|
(0.9 %)
|
|
0.1 %
|
|
22.3 %
|
Net
loss
|
|
|
(206,073)
|
|
39,754
|
|
7,137
|
|
63,365
|
|
(2,900)
|
|
(98,717)
|
Diluted
earnings (loss) per share
|
$
(7.10)
|
|
$
1.37
|
|
$
0.25
|
|
$
2.18
|
|
$
(0.10)
|
|
$
(3.40)
|
The above adjusted selling and administrative expenses, adjusted
selling and administrative expense rate, adjusted depreciation
expense, adjusted depreciation expense rate, adjusted operating
loss, adjusted operating loss rate, adjusted income tax benefit,
adjusted effective income tax rate, adjusted net loss, and adjusted
diluted earnings (loss) per share are "non-GAAP financial
measures" as that term is defined by Rule 101 of Regulation G (17
CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229).
These non-GAAP financial measures exclude from the most directly
comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in
the United States of America
("GAAP") synthetic lease exit costs and related expenses of
$53,567 ($39,754, net of tax), FDC contract termination
costs and related expenses of $9,617
($7,137, net of tax), store asset
impairment charges of $83,808
($63,365, net of tax), and a gain on
sale of real estate and related expenses of $3,799 ($2,900, net
of tax).
Our management believes that the disclosure of these non-GAAP
financial measures provides useful information to investors because
the non-GAAP financial measures present an alternative and more
relevant method for measuring our operating performance, excluding
special items included in the most directly comparable GAAP
financial measures, that management believes is more indicative of
our on-going operating results and financial condition. Our
management uses these non-GAAP financial measures, along with the
most directly comparable GAAP financial measures, in evaluating our
operating performance.
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SOURCE Big Lots, Inc.