Big Lots (NYSE:BIG) Reports Sales Below Analyst Estimates In Q1 Earnings

Kayode Omotosho /
2024/06/06 7:07 am EDT

Discount retail company Big Lots (NYSE:BIG) missed analysts' expectations in Q1 CY2024, with revenue down 10.2% year on year to $1.01 billion. It made a non-GAAP loss of $4.51 per share, down from its loss of $3.40 per share in the same quarter last year.

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Big Lots (BIG) Q1 CY2024 Highlights:

  • Revenue: $1.01 billion vs analyst estimates of $1.04 billion (3% miss)
  • EPS (non-GAAP): -$4.51 vs analyst estimates of -$3.92
  • Gross Margin (GAAP): 36.8%, up from 34.9% in the same quarter last year
  • Locations: 1,300 at quarter end, down from 1,427 in the same quarter last year
  • Same-Store Sales fell 9.9% year on year
  • (-18.2% in the same quarter last year)
  • Market Capitalization: $103.9 million

Commenting on today's results announcement, Bruce Thorn, President and CEO of Big Lots stated, "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. 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."

Priding itself on carrying brand-name items, Big Lots (NYSE:BIG) is a discount retailer that acquires excess inventory and then sells at meaningful discounts to the prices of traditional retailers.

Discount Retailer

Discount retailers understand that many shoppers love a good deal, and they focus on providing excellent value to shoppers by selling general merchandise at major discounts. They can do this because of unique purchasing, procurement, and pricing strategies that involve scouring the market for trendy goods or buying excess inventory from manufacturers and other retailers. They then turn around and sell these snacks, paper towels, toys, clothes, and myriad other products at highly enticing prices. Despite the unique draw and lure of discounts, these discount retailers must also contend with the secular headwinds of online shopping and challenged retail foot traffic in places like suburban strip malls.

Sales Growth

Big Lots is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it's growing off a smaller base than its larger counterparts.

As you can see below, the company's revenue has declined over the last four years, dropping 2.6% annually as its store count and sales at existing, established stores have both shrunk.

Big Lots Total Revenue

This quarter, Big Lots missed Wall Street's estimates and reported a rather uninspiring 10.2% year-on-year revenue decline, generating $1.01 billion in revenue. Looking ahead, Wall Street expects revenue to decline 2.5% over the next 12 months.

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Same-Store Sales

Same-store sales growth is a key performance indicator used to measure organic growth and demand for retailers.

Big Lots's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 12.3% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn't been the case here.

Big Lots Year On Year Same Store Sales Growth

In the latest quarter, Big Lots's same-store sales fell 9.9% year on year. This decrease was a further deceleration from the 18.2% year-on-year decline it posted 12 months ago. We hope the business can get back on track.

Key Takeaways from Big Lots's Q1 Results

We struggled to find many strong positives in these results. Its revenue and EPS unfortunately missed analysts' expectations as its same-store sales underperformed. On top of that, its full-year same-store sales forecast fell short of Wall Street's estimates, implying a weak operating environment. The company did not share an earnings outlook, a yellow flag for investors. Overall, this was a bad quarter for Big Lots. The stock is down 16% after reporting and currently trades at $2.96 per share.

So should you invest in Big Lots right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.