On Friday, Big Lots (NYSE:BIG) shares experienced a reduction in its price target to $2.50 from the previous $5.00, while retaining a Market Perform rating, following a disappointing first quarter in 2024.
The company reported an adjusted EPS of ($4.51), which fell short of both the analyst's estimate of ($4.38) and the FactSet consensus of ($3.92). Additionally, comparable store sales decreased by 9.9%, which was more severe than the anticipated decline of 5.0%.
The retailer faced challenges across various product categories due to a pullback by its core customers in a tough macroeconomic climate.
Consumer confidence dropped, and spending on discretionary items, especially big-ticket products, was affected. Weather conditions also played a role, with February and April showing weaker performance compared to March.
Despite the overall negative trend, Big Lots saw some positive developments in specific sub-categories. Pet and toy segments showed a positive comparable sales performance in the first quarter due to an increased focus on bargain items and new merchandise offerings.
Looking ahead, Big Lots has observed a sequential improvement in comparable store sales in May and June, with expectations for this trend to persist throughout the remainder of 2024. The company aims to achieve a positive comparable store sales figure by the end of the year.
However, it has revised its second-quarter guidance downward, anticipating a high single-digit to mid-single-digit percentage decrease in comparable store sales, which is a steeper drop than the FactSet estimate of a 3.3% decline.
In other recent news, Big Lots, Inc. reported on its first-quarter financial performance, indicating a miss on sales targets due to decreased consumer spending on high-ticket items.
Despite this, the company noted improvements in gross margin rate and operating expenses, driven by operational initiatives and cost reductions.
The firm's President and CEO, Bruce Thorn, shed light on strategies to enhance liquidity, including a new $200 million term loan facility, and the commitment to drive positive comp sales growth and increase gross margin rate in the latter half of the year.
Big Lots has also been focusing on expanding vendor relationships to access more closeout deals, aiming to improve value perception and brand awareness.
The company has been enhancing its online presence and store relevance by featuring extreme bargain deals. Furthermore, it is anticipated that Project Springboard will deliver $185 million in cumulative savings by year-end.
In terms of future expectations, Big Lots forecasts sequential comp sales improvement and a gross margin rate improvement of at least 300 basis points in Q2. The company also plans to open three new stores in Q3.
Lastly, the benefits from Project Springboard are expected to total $25 million in Q1, with an increased target of an incremental benefit of around $150 million in 2024.
These recent developments underline Big Lots' efforts to navigate the current retail environment and improve its financial performance in the upcoming quarters.
InvestingPro Insights
As Big Lots (NYSE:BIG) navigates a challenging retail environment, the latest data from InvestingPro underscores some of the hurdles and opportunities the company faces. With a market capitalization of $85 million, Big Lots is trading at a low Price / Book multiple of 0.3, which could appeal to value investors searching for discounted assets. This is particularly relevant as the company's stock is trading near its 52-week low, reflecting the market's response to recent performance and the broader economic pressures.
InvestingPro Tips indicate that Big Lots has maintained dividend payments for 10 consecutive years, although the most recent data shows a 100% dividend cut, signaling potential cash flow concerns. Moreover, the company's stock price has experienced significant volatility, with a 17.24% drop in the last week alone, and a substantial 61.9% decrease over the past year.
For investors considering Big Lots, these metrics suggest a cautious approach, given the company's significant debt and cash burn concerns. However, the stock's low valuation could present a contrarian opportunity should the company's strategic focus on bargain items and new merchandise offerings begin to resonate more strongly with consumers. For a deeper analysis and additional InvestingPro Tips, visit InvestingPro. There are 16 more tips available to help you make a more informed decision. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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