Big Lots Tumbles After Surprise Loss, Big Miss on Sales

By Geoffrey Smith 

AiVIF.com -- Big Lots (NYSE:BIG) stock fell over 21% in premarket trading on Friday after the rising pressure on consumer budgets pushed the discount retailer to a hefty miss on sales and a surprise loss in the three months through April. 

The news adds to a lengthening list of retailers who have announced disappointing earnings this quarter due to high inflation, supply chain problems, and a fading of pandemic-era fiscal stimulus effects. It comes hard on the heels of Gap (NYSE:GPS) cutting its outlook for the year after the bell on Thursday. 

Big Lots lost $11.1 million on an adjusted basis in the quarter, or 39c a share. The consensus forecast of $1.09 had already been below the company's own guidance range of $1.10 to $1.20.

Chief Executive Bruce Thorn said that after a solid February and March, "trends materially slowed in April, resulting in a need to increase markdowns."

"We believe the slowdown was caused by the spending pressure our consumers felt from higher gas prices and broader inflation, which is affecting discretionary purchases across the retail industry," Thorn added. "As a result, we missed our sales plan by approximately $100 million, the vast majority in April."

Supply chain impacts also continued to be "significant headwinds," he noted. 

Thorn said the environment will remain "challenging" in the current quarter, forcing it into an aggressive reduction of inventories, and a "temporary" scaling back of Capex associated with new store openings and refurbishments. 

Inventory rose nearly 50% from a year earlier, with higher input costs and slower delivery times combining to swallow ever more working capital.

Big Lots withdrew its guidance for the full year, citing the high level of ongoing uncertainty. However, it said the cost savings that it's planning between now and the end of its fiscal year should return gross margins to their levels of a year ago by the fourth quarter. 

By 7:40 AM ET (1140 GMT), Big Lots stock had pared its losses slightly to be indicated down only 18%, having bounced off the two-year low level that it hit earlier in the week.