BIG - Big Lots stock lifted by lighter than expected loss

Big Lots ( NYSE: BIG ) stock gained sharply on Thursday as a lighter than expected Q4 loss overshadowed a lack of formal guidance for the year ahead.

For the fourth quarter, the Ohio-based retailer reported a $0.28 per share loss, far better than the $0.77 loss anticipated by analysts. Meanwhile, $1.54B in revenue only narrowly missed expectations. Comparable sales declined 13% from the prior year, outpacing the 10.3% expectation.

While gross margin contracted 100 basis points, the company noted that inventory was reduced by 7.3%, alleviating some margin pressure on the company. Total inventory ended the quarter at $1.15B, slightly above the $1.13B consensus estimate.

“Despite the extremely difficult consumer environment throughout 2022, we've taken action to strengthen and transform our business model. Against that backdrop, we made sequential progress to improve our margins, tightly manage expenses, and right-size our inventories over the last few quarters,” CEO Bruce Thorn commented. “Even though our furniture business was adversely impacted by the unexpected closure of our largest vendor, we were able to deliver fourth quarter sales and gross margins that were in line with guidance.”

Moving forward, Thorn said that sales momentum thus far in 2023 gives him confidence. Additionally, the company is focused on growing margin and reducing expenses in the year ahead.

Management expects Q1 comparable sales to fall by a low to mid-teen percentage as compared to the year prior. The company expects the first quarter gross margin rate to improve sequentially versus Q4 into the high-30% range. EPS guidance was not offered.

“Earnings momentum will be weighted towards the back half of the year, as key actions to improve the business gain traction, and as freight cost reductions continue to be realized,” the company earnings release explained. “Given greater than usual uncertainty in the macroeconomic environment, at this point the company is not providing formal full year guidance.”

Despite the uncertain outlook for the full-year, shares of Big Lots ( BIG ) rose 6.77% near the midpoint of Thursday’s trading. It is worth noting that short interest in Big Lots ( BIG ) stands at over 30%.

The company also declared a $0.30 quarterly dividend on Thursday .

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