Big Lots, Inc. BIG reported an adjusted loss of 28 cents per share for fourth-quarter fiscal 2023, which was wider than the Zacks Consensus Estimate of a loss of 12 cents. The metric came in line with the year-ago quarter’s adjusted loss figure.
Net sales of this Columbus, OH-based player declined 7.2% to $1,432 million year over year and missed the consensus estimate of $1,436 million. The year-over-year downside was due to soft comparable sales, which fell 8.6% year over year. Also, the net effect of the 53rd-week benefit and store count decrease contributed nearly 140 basis points (bps) of sales decline in comparison with the fourth quarter of fiscal 2022.
Nonetheless, the company saw sequential improvement in comps and gross margin, alongside continuing with curtailing costs. Big Lots’ focus on its five key actions helped it deliver adjusted operating profit growth in the fourth quarter, which marked its first quarter of adjusted profit in two years. Markedly, the company’s five key actions include owning bargains, communicating unique value, enhancing store relevance, strengthening customer relationships through omnichannel initiatives, and driving productivity.
Management stated that its efforts to manage costs, capital expenditures and inventory, along with monetizing owned assets, have helped it maintain its liquidity position despite a tough operating landscape. In 2023, Big Lots reduced SG&A costs worth $140 million, lowered capital expenditures by nearly 60%, curtailed inventory by around $200 million, and monetized assets of more than $300 million. The company ended the fourth quarter with net liquidity of $254 million and generated considerable free cash flow in the quarter.
While the company expects the near-term to remain difficult, it remains positive about restoring the organization to a state of health and prosperity. Management expects uncertainties to persist in 2024 due to elections, interest rate fluctuations and potential supply-chain bottlenecks. However, the company will focus on managing the hurdles and accelerating its business turnaround.
In 2024, Big Lots expects to continue witnessing quarterly year-over-year gross margin enhancements. It also anticipates a pathway toward achieving positive comparable sales as the year unfolds. Moving on, it expects to realize most of the bottom-line opportunities (of more than $200 million) through Project Springboard. Additionally, management expects significant bargain penetration expansion, which is likely to reach 75% of total sales.
Big Lots, Inc. Price, Consensus and EPS Surprise
Big Lots, Inc. price-consensus-eps-surprise-chart | Big Lots, Inc. Quote
More on Results
Gross profit dropped 2.9% year over year to $544.4 million. However, Big Lots’ gross margin increased 170 bps to 38% from the year-ago quarter’s figure of 32.6%. We had also expected a gross margin expansion of 170 bps in the quarter.
In the reported quarter, adjusted SG&A expenses were $509.9 million, down 2.3% year over year. As a percentage of net sales, the metric increased 180 bps to 35.6%. We anticipated SG&A expenses, as a rate of sales, to increase 130 bps in the quarter. Initial benefits of Project Springboard contributed to the solid SG&A performance.
The company recorded an adjusted operating profit of $1,063 million in the reported quarter against the adjusted operating loss of $2,334 million delivered in the year-ago period.
Other Financial Details
Big Lots ended the quarter with cash and cash equivalents of $46.4 million and long-term debt of $406.3 million. Total shareholders’ equity was $284.5 million. Inventories decreased to $953.3 million from $1,148 million recorded in the prior-year period.
For the 53 weeks that ended on Feb 3, 2024, BIG used net cash worth roughly $252 million from operating activities.
The company made capital expenditures worth $18 million in the fourth quarter. It did not make any share repurchases during the quarter. It had $159 million remaining under its $250 million authorization.
BIG introduced three stores in the fourth quarter and shut down 39 stores. The company concluded the quarter with 1,392 stores.
Guidance
For the first quarter of fiscal 2024, management anticipates comp sales to improve from the fourth quarter of fiscal 2023 and be in the mid-single-digit negative range. Big Lots expects key business enhancement endeavors to gain traction.
The company expects the gross margin to improve significantly year over year, growing 200-250 basis points in the first quarter. This is likely to result from lower markdown activity, reduced freight costs, as well as cost control and productivity efforts.
Big Lots expects first-quarter adjusted SG&A to decline in the low-single-digit percentage compared with 2023. It does not expect to realize any tax benefit in the quarter. Management has not yet provided earnings per share (EPS) guidance for the first quarter but expects the adjusted operating loss to be better than 2023.
Over the past six months, shares of this Zacks Rank #4 (Sell) company have tumbled 11.2% against the industry’s 29.7% rise.
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