BIG - Big Lots stock slumps on wider than expected loss dividend suspension

2023-05-26 07:17:47 ET

Big Lots ( NYSE: BIG ) shares fell about 10% in premarket trading on Friday after falling short of Q1 expectations and suspending its dividend.

The Ohio-based retailer reported a $3.40 per share loss on an adjusted basis, more than doubling the expected $1.57 per share loss. The steep loss came as net sales declined 18.3% decrease year over year, $70M below the Street consensus. On a GAAP basis, the company notched a $7.10 per share loss due to a net after-tax charge of $107.4M in the quarter.

Gross margins contracted about 180 basis points in the quarter as the company pursued markdowns to reduce an inventory hang. Inventory ended the first quarter down 18.8% as compared to Q1 2022 to $1.088B.

“Macroeconomic 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,” CEO Bruce Thorn said. “In particular, we expect furniture and seasonal to return to being the strong growth drivers for our business as they have been in the past, as consumer confidence improves and as we continue to bring newness and incredible value to our assortment.”

He added that the company is taking aggressive action to cut costs and inventory levels. Thorn said he is “encouraged by the green shoots” he is seeing in the business as customers turn toward seeking more bargains.

“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,” Thorn commented. “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.”

The company also suspended its dividend after the results.

Shares of Big Lots ( BIG ) slid 11.12% in premarket trading after the earnings announcement .

More on Big Lots:

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Big Lots: Still Not A Buy, But A Value Play At $5

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