Q2 comparable sales and adjusted expenses better than expected; gross margin rate improves year-over-year
Q2 GAAP EPS loss of
Sale/leaseback of
Continue to expect business improvements in the back half of 2023, with a moderating comp sales decline and improving gross margins; cost reduction and productivity initiatives through 2024 on track
For the Q2 Results Presentation, Please Visit: https://www.biglots.com/corporate/investors
Net sales for the second quarter of fiscal 2023 totaled
Commenting on today's results announcement,
"While the consumer environment will likely remain challenging and result in negative comp sales in the back half of the year, we are now in a position to get back to playing offense. This will be supported by the incredible efforts of our associates, and our outstanding vendor partners, who remain aligned with our efforts to offer great quality products and amazing value. As we make further progress on our five key actions, we are optimistic that trends will continue to improve, albeit slowly, through the remainder of this year, aided by a higher penetration of bargains, more newness in our assortment, freight reductions, ongoing cost reduction and productivity efforts, more effective promotions, and a more normalized level of markdowns."
"On the cost reduction and productivity front, we are well on track to achieve our structural SG&A savings goal of over
"Turning to liquidity, we are very comfortable with our position coming into the second half of the year. We significantly strengthened our balance sheet by closing the
"Overall, we are excited to see signs of improvement across multiple fronts, and are confident that our five key actions will translate into continued sequential improvement in financial performance as the year progresses."
A summary of adjustments to loss per diluted share is included in the table below.
Q2 2023 |
|
Earnings (loss) per diluted share - as reported |
( |
Adjustment to exclude net impact of synthetic lease |
|
Earnings (loss) per diluted share – adjusted basis |
( |
(1) Non-GAAP detailed reconciliation provided in statement below |
Inventory and Cash Management
Inventory ended the second quarter of fiscal 2023 at
The company ended the second quarter of fiscal 2023 with
Sale/Leaseback Update
On
Share Repurchases
The company did not execute any share repurchases during the quarter. The company has
Company Guidance
For the third quarter, the company expects comps to be down in the low-teen range, modestly improved relative to the second quarter. A net decrease in store count, partially offset by new stores and relocations, will contribute approximately 140 basis points of sales decline compared to the third quarter of 2022. With regard to gross margin rate, the company expects accelerated rate improvement in the second half of the year, with approximately 200 basis points of improvement in the third quarter relative to the prior year quarter. The company expects adjusted SG&A dollars to be down by a low-single digit percentage versus 2022. The company does not expect to recognize any tax benefit in the third quarter as we expect to remain in a three-year cumulative loss position, which requires us to record valuation allowances against deferred tax assets, including those related to net operating losses. The company is not providing EPS guidance at this point. The company expects a share count of approximately 29.3 million for the third quarter.
For the fourth quarter, the company expects comp sales to be improved relative to the third quarter and be in the high-single-digit negative range, as key actions to improve the business continue to gain traction. The company expects the fourth quarter gross margin rate to improve to a rate into the high-30s range driven by more normalized markdown activity, lower freight costs, and cost reduction and productivity initiatives.
Conference Call/Webcast
The company will host a conference call today at
About
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.
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
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
|
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
(In thousands) |
|||||||
|
|
||||||
2023 |
2022 |
||||||
(Unaudited) |
(Unaudited) |
||||||
ASSETS |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
|
|
|||||
Inventories |
983,225 |
1,159,008 |
|||||
Other current assets |
99,902 |
110,926 |
|||||
Total current assets |
1,129,161 |
1,319,078 |
|||||
Operating lease right-of-use assets |
1,490,076 |
1,700,600 |
|||||
Property and equipment - net |
721,896 |
753,696 |
|||||
Deferred income taxes |
0 |
20,991 |
|||||
Other assets |
38,555 |
36,995 |
|||||
|
|
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Current liabilities: |
|||||||
Accounts payable |
|
|
|||||
Current operating lease liabilities |
240,076 |
233,883 |
|||||
Property, payroll and other taxes |
72,352 |
95,323 |
|||||
Accrued operating expenses |
123,454 |
121,583 |
|||||
Insurance reserves |
35,707 |
40,210 |
|||||
Accrued salaries and wages |
28,135 |
23,476 |
|||||
Income taxes payable |
598 |
1,632 |
|||||
Total current liabilities |
838,795 |
919,804 |
|||||
Long-term debt |
493,200 |
252,600 |
|||||
Noncurrent operating lease liabilities |
1,453,961 |
1,572,575 |
|||||
Deferred income taxes |
485 |
0 |
|||||
Insurance reserves |
57,845 |
59,621 |
|||||
Unrecognized tax benefits |
8,456 |
8,266 |
|||||
Other liabilities |
220,917 |
127,767 |
|||||
Shareholders' equity |
306,029 |
890,727 |
|||||
|
|
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
(In thousands, except per share data) |
|||||||
13 WEEKS ENDED |
13 WEEKS ENDED |
||||||
|
|
||||||
% |
% |
||||||
(Unaudited) |
(Unaudited) |
||||||
Net sales |
|
100.0 |
|
100.0 |
|||
Gross margin |
375,884 |
33.0 |
438,548 |
32.6 |
|||
Selling and administrative expenses |
456,689 |
40.1 |
510,444 |
37.9 |
|||
Depreciation expense |
41,282 |
3.6 |
37,197 |
2.8 |
|||
Operating loss |
(122,087) |
(10.7) |
(109,093) |
(8.1) |
|||
Interest expense |
(11,175) |
(1.0) |
(3,904) |
(0.3) |
|||
Other income (expense) |
0 |
0.0 |
257 |
0.0 |
|||
Loss before income taxes |
(133,262) |
(11.7) |
(112,740) |
(8.4) |
|||
Income tax expense (benefit) |
116,575 |
10.2 |
(28,590) |
(2.1) |
|||
Net loss |
( |
(21.9) |
( |
(6.3) |
|||
Earnings (loss) per common share |
|||||||
Basic |
( |
( |
|||||
Diluted |
( |
( |
|||||
Weighted average common shares outstanding |
|||||||
Basic |
29,175 |
28,919 |
|||||
Dilutive effect of share-based awards |
- |
- |
|||||
Diluted |
29,175 |
28,919 |
|||||
Cash dividends declared per common share |
|
|
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
(In thousands, except per share data) |
|||||||
26 WEEKS ENDED |
26 WEEKS ENDED |
||||||
|
|
||||||
% |
% |
||||||
(Unaudited) |
(Unaudited) |
||||||
Net sales |
|
100.0 |
|
100.0 |
|||
Gross margin |
768,353 |
34.0 |
943,142 |
34.7 |
|||
Selling and administrative expenses |
1,073,755 |
47.4 |
991,223 |
36.4 |
|||
Depreciation expense |
77,864 |
3.4 |
74,553 |
2.7 |
|||
Operating loss |
(383,266) |
(16.9) |
(122,634) |
(4.5) |
|||
Interest expense |
(20,324) |
(0.9) |
(6,654) |
(0.2) |
|||
Other income (expense) |
5 |
0.0 |
1,297 |
0.0 |
|||
Loss before income taxes |
(403,585) |
(17.8) |
(127,991) |
(4.7) |
|||
Income tax expense (benefit) |
52,325 |
2.3 |
(32,759) |
(1.2) |
|||
Net loss |
( |
(20.1) |
( |
(3.5) |
|||
Earnings (loss) per common share |
|||||||
Basic |
( |
( |
|||||
Diluted |
( |
( |
|||||
Weighted average common shares outstanding |
|||||||
Basic |
29,096 |
28,770 |
|||||
Dilutive effect of share-based awards |
- |
- |
|||||
Diluted |
29,096 |
28,770 |
|||||
Cash dividends declared per common share |
|
|
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(In thousands) |
|||||||
13 WEEKS ENDED |
13 WEEKS ENDED |
||||||
|
|
||||||
(Unaudited) |
(Unaudited) |
||||||
Net cash provided by operating activities |
|
|
|||||
Net cash used in investing activities |
(7,897) |
(45,631) |
|||||
Net cash used in financing activities |
(15,716) |
(27,756) |
|||||
Decrease in cash and cash equivalents |
(5,286) |
(12,563) |
|||||
Cash and cash equivalents: |
|||||||
Beginning of period |
51,320 |
61,707 |
|||||
End of period |
|
|
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
(In thousands) |
|||||||
26 WEEKS ENDED |
26 WEEKS ENDED |
||||||
|
|
||||||
(Unaudited) |
(Unaudited) |
||||||
Net cash used in operating activities |
( |
( |
|||||
Net cash used in investing activities |
(20,378) |
(86,872) |
|||||
Net cash provided by financing activities |
172,293 |
217,703 |
|||||
Increase (decrease) in cash and cash equivalents |
1,304 |
(4,578) |
|||||
Cash and cash equivalents: |
|||||||
Beginning of period |
44,730 |
53,722 |
|||||
End of period |
|
|
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 expense (benefit), effective income tax rate, net loss, and diluted earnings (loss) per share for the second quarter of 2023, the year-to-date 2023, the second quarter of 2022, and the year-to-date 2022 (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 expense (benefit), adjusted effective income tax rate, adjusted net loss, and adjusted diluted earnings (loss) per share (non-GAAP financial measures).
Second Quarter of 2023 - Thirteen weeks ended |
|||||||||||||||||
As Reported |
Adjustment to |
Adjustment to exclude |
Adjustment |
Adjustment to |
Adjustment to |
Adjustment to |
As Adjusted |
||||||||||
Selling and administrative expenses |
$ 456,689 |
$ (43) |
$ (1,993) |
$ 928 |
$ 3,393 |
$ (5,420) |
$ - |
$ 453,554 |
|||||||||
Selling and administrative expense rate |
40.1 % |
(0.0 %) |
(0.2 %) |
0.1 % |
0.3 % |
(0.5 %) |
- |
39.8 % |
|||||||||
Depreciation expense |
41,282 |
- |
(7,037) |
- |
- |
- |
- |
34,245 |
|||||||||
Depreciation expense rate |
3.6 % |
- |
(0.6 %) |
- |
- |
- |
- |
3.0 % |
|||||||||
Operating loss |
(122,087) |
43 |
9,030 |
(928) |
(3,393) |
5,420 |
- |
(111,915) |
|||||||||
Operating loss rate |
(10.7 %) |
0.0 % |
0.8 % |
(0.1 %) |
(0.3 %) |
0.5 % |
- |
(9.8 %) |
|||||||||
Income tax expense (benefit) (1) |
116,575 |
11 |
2,342 |
(239) |
(804) |
1,272 |
(147,850) |
(28,693) |
|||||||||
Effective income tax rate |
(87.5 %) |
0.0 % |
(1.8 %) |
0.2 % |
0.6 % |
(1.0 %) |
112.8 % |
23.3 % |
|||||||||
Net loss |
(249,837) |
32 |
6,688 |
(689) |
(2,589) |
4,148 |
147,850 |
(94,397) |
|||||||||
Diluted earnings (loss) per share |
$ (8.56) |
$ 0.00 |
$ 0.23 |
$ (0.02) |
$ (0.09) |
$ 0.14 |
$ 5.07 |
$ (3.24) |
|||||||||
(1) The income tax impact of each adjustment was determined prior to consideration of the valuation allowance on deferred tax assets. |
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 expense (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
Year-to-Date 2023 - Twenty-six weeks ended |
|||||||||||||||||
As Reported |
Adjustment to |
Adjustment to exclude |
Adjustment |
Adjustment to |
Adjustment to |
Adjustment to |
As Adjusted |
||||||||||
Selling and administrative expenses |
$ 1,073,755 |
$ (53,610) |
$ (10,616) |
$ (82,881) |
$ 7,192 |
$ (5,420) |
$ - |
$ 928,420 |
|||||||||
Selling and administrative expense rate |
47.4 % |
(2.4 %) |
(0.5 %) |
(3.7 %) |
0.3 % |
(0.2 %) |
- |
41.0 % |
|||||||||
Depreciation expense |
77,864 |
- |
(8,030) |
- |
- |
- |
- |
69,834 |
|||||||||
Depreciation expense rate |
3.4 % |
- |
(0.4 %) |
- |
- |
- |
- |
3.1 % |
|||||||||
Operating loss |
(383,266) |
53,610 |
18,646 |
82,881 |
(7,192) |
5,420 |
- |
(229,901) |
|||||||||
Operating loss rate |
(16.9 %) |
2.4 % |
0.8 % |
3.7 % |
(0.3 %) |
0.2 % |
- |
(10.2 %) |
|||||||||
Income tax expense (benefit) (1) |
52,325 |
13,830 |
4,810 |
20,210 |
(1,703) |
1,272 |
(147,850) |
(57,106) |
|||||||||
Effective income tax rate |
(13.0 %) |
(4.5 %) |
(1.6 %) |
(6.6 %) |
0.6 % |
(0.4 %) |
48.3 % |
22.8 % |
|||||||||
Net loss |
(455,910) |
39,780 |
13,836 |
62,671 |
(5,489) |
4,148 |
147,850 |
(193,114) |
|||||||||
Diluted earnings (loss) per share |
$ (15.67) |
$ 1.37 |
$ 0.48 |
$ 2.15 |
$ (0.19) |
$ 0.14 |
$ 5.08 |
$ (6.64) |
|||||||||
(1) The income tax impact of each adjustment was determined prior to consideration of the valuation allowance on deferred tax assets. |
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 expense (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 GAAP synthetic lease exit costs and related expenses of
Second Quarter of 2022 - Thirteen weeks ended |
|||||||
As Reported |
Adjustment to |
As Adjusted |
|||||
Selling and administrative expenses |
$ 510,444 |
$ (24,105) |
$ 486,339 |
||||
Selling and administrative expense rate |
37.9 % |
(1.8 %) |
36.1 % |
||||
Operating loss |
(109,093) |
24,105 |
(84,988) |
||||
Operating loss rate |
(8.1 %) |
1.8 % |
(6.3 %) |
||||
Income tax benefit |
(28,590) |
5,956 |
(22,634) |
||||
Effective income tax rate |
25.4 % |
0.1 % |
25.5 % |
||||
Net loss |
(84,150) |
18,149 |
(66,001) |
||||
Diluted earnings (loss) per share |
$ (2.91) |
$ 0.63 |
$ (2.28) |
The above adjusted selling and administrative expenses, adjusted selling and administrative 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 GAAP store asset impairment charges of
Year-to-Date 2022 - Twenty-six weeks ended |
|||||||
As Reported |
Adjustment to |
As Adjusted |
|||||
Selling and administrative expenses |
$ 991,223 |
$ (24,105) |
$ 967,118 |
||||
Selling and administrative expense rate |
36.4 % |
(0.9 %) |
35.5 % |
||||
Operating loss |
(122,634) |
24,105 |
(98,529) |
||||
Operating loss rate |
(4.5 %) |
0.9 % |
(3.6 %) |
||||
Income tax benefit |
(32,759) |
5,956 |
(26,803) |
||||
Effective income tax rate |
25.6 % |
0.2 % |
25.8 % |
||||
Net loss |
(95,232) |
18,149 |
(77,083) |
||||
Diluted earnings (loss) per share |
$ (3.31) |
$ 0.63 |
$ (2.68) |
The above adjusted selling and administrative expenses, adjusted selling and administrative 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 GAAP store asset impairment charges of
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
Investor Relations, Alvin Concepcion, aconcepc@biglots.com, 614-278-2705 OR Media Relations, Josh Chaney, jchaney@biglots.com, 614-398-8896