Big Lots Left With Challenge After Results Show Consumer Squeeze

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Downbeat first quarter results for Big Lots did little to stem the bleed out of stock value this week, as the cost of living squeeze hit hard pressed customers at the home discount retailer.

Big Lots shares are down by nearly two-thirds since the start of 2024 and only a fraction better over the past 12 months, taking a circa 25% this week dip after Big Lots reported a net loss of $205.0 million for the first quarter of fiscal 2024 ended May 4 2024. The result included a net post-tax loss of $72.7 million associated with impairment charges, fees related to its Project Springboard, plus costs from distribution center closures.

Excluding these, the adjusted net loss for the first quarter was $132.3 million.

Net sales at the chain, which buys up branded excess inventory to sell at deep discounts, for the first quarter of fiscal 2024 totaled $1.009 billion, 10.2% down for the same period last year, driven by a comparable sales decrease of 9.9% the company said.

It’s all left Bruce Thorn, President and CEO of Big Lots, with a major challenge as he tries to turn the fortunes of the retailer around.

“While we made substantial progress on improving our business operations in Q1, we missed our sales goals due largely to a continued pullback in consumer spending by our core customers, particularly in high ticket discretionary items,” Thorn said.

“We remain focused on managing through the current economic cycle by controlling the controllables. As we move forward, we’re taking aggressive actions to drive positive comp sales growth in the latter part of the year and into 2025, and to maintain year-over-year gross margin rate improvements, all driven by progress on our five key actions.”

Big Lots Looks To Plan

Headquartered in Columbus, Ohio Big Lots has over 1,300 stores in 48 states and Thorn said that operational initiatives to offer a larger assortment of extreme bargains, cut costs, and increase productivity exceeded the company’s Q1 targets.

“This enabled us to improve consumer perceptions about our brand and the value we offer, and to deliver a year-over-year improvement in gross margin and operating expenses, despite significant sales pressure,” he added.

The five key actions from Big Lots as part of its turnaround plan are to: own bargains, to communicate unmistakable value, to increase store relevance, to win customers for life with its omni-channel efforts, and to drive productivity.

“We still have a lot of work ahead of us, but remain confident that the five key actions are putting us on the right path to turn around our business,” Thorn said.

Extreme Bargains

The company is targeting “75% bargain penetration” and is looking to substantially grow its extreme bargain penetration to 50% by year-end. Big Lots’ extreme bargains are designed to provide significant savings and Thorn said the company is working on improving both sales and gross margin.

“A key part of that work is to realize most of the $200 million plus of bottom-line opportunities through Project Springboard this year and, on that front, we are ahead of schedule. In fact, we are raising our target to $185 million of cumulative benefits by year-end, versus $175 million previously,” he insisted.

“Meanwhile, we are pleased with our actions to preserve and enhance liquidity in Q1, which included aggressive efforts to manage opex, capex and inventory, and the execution of a new $200 million term loan facility, which provides us with significant additional financial flexibility.”

With Big Lots saying that near-term conditions remain challenging, the company said that it expect the benefits of its efforts to be seen in the second half of the year.

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