| --- | --- | --- | |-------|-------|-------| | | | | | | | | | | | | FORWARD-LOOKING STATEMENTS Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," "out ...

Financial Data and Key Metrics Changes - Q1 net sales were $1.375 billion, a 15.4% decrease compared to $1.626 billion a year ago, driven by a comparable sales decrease of 17% [28] - The first quarter net loss was $11.1 million compared to a net income of $94.6 million in Q1 of 2021, with a loss per share of $0.39 versus diluted EPS of $2.62 last year [28] - The gross margin rate for Q1 was 36.7%, down approximately 350 basis points from last year's rate, significantly underperforming guidance [28][29] - Total ending inventory cost was up 48.5% year-over-year at $1.339 billion, primarily due to inflationary increases and mix effects [31] Business Line Data and Key Metrics Changes - Seasonal, Furniture, and Soft Home categories drove 90% of the sales miss for the quarter, with significant softness in April [12][13] - Seasonal sales performed well in February and March, up 40% on a three-year comp basis, but April saw a decline [12] - The e-commerce business accounted for around 7% of total business, with same-day delivery growing 20% [22] Market Data and Key Metrics Changes - Consumer confidence is low, and real disposable income is declining, impacting discretionary purchases [6][13] - The Midwest region showed particular softness relative to plan, while the Southeast performed better [13] Company Strategy and Development Direction - The company is focused on correcting inventory levels and adjusting opening price points to drive traffic [19][21] - Plans to reduce capital expenditures from $230 million to around $175 million for the year, with a reduction in net store openings from 50-plus to 30-plus [18][37] - The company aims to leverage closeout opportunities and improve gross margin rates by Q4 [17][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging economic environment but remains confident in long-term growth opportunities [25][39] - The company expects to see significant opportunities in the second half of the year as corrective actions take effect [35][39] - Management emphasizes the importance of supporting lower-income customers during inflationary times [62] Other Important Information - The company declared a quarterly cash dividend of $0.30 per common share, payable on June 24, 2022 [33] - The company has incurred significant detention and demurrage charges, which are expected to decrease in the back half of the year [36] Q&A Session Summary Question: Confidence in returning to normal inventory levels by the end of Q2 - Management is aggressively focused on achieving desired inventory levels by the end of Q2, expecting a significant reduction in year-over-year increases [41][42] Question: Improvement in three-year comp in May - Management believes there has been a slight pickup in underlying trends, but promotional activity has also played a significant role [44] Question: Actions to lower opening price points - Management is working on reducing rich inventory and leveraging closeouts to improve opening price points [48][49] Question: Confidence in returning to last year's gross margin levels - Management cites several levers, including reduced detention and demurrage costs, improved inventory management, and a less promotional environment in the second half of the year [51][54] Question: Profitability variance among stores - A relatively small number of stores are unprofitable, with profitability varying by geography and other factors [75] Question: Increase in usage of Big Lots credit card and Easy Leasing - The increase is attributed to inflationary pressures, making these financing options more appealing to consumers [76]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 29, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 001-08897 BIG LOTS, INC. (Exact name of registrant as specified in its charter) Ohio 06-1119097 (State or oth ...

| --- | --- | --- | |-------|-------|-------| | | | | | | | | FORWARD-LOOKING STATEMENTS Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," "outlook" an ...

Financial Data and Key Metrics Changes - Q4 net sales were $1.732 billion, a 0.3% decrease compared to $1.738 billion a year ago, but up 7.8% compared to Q4 2019 [43] - Adjusted earnings per share for the quarter was $1.75, down from $2.59 last year [43][54] - Gross margin rate for the quarter was 37.3%, down approximately 210 basis points from last year's rate [44] - Total ending inventory was up 32% to last year at $1.238 billion, ahead of guidance due to higher in-transit inventory [48] Business Line Data and Key Metrics Changes - Broyhill accounted for approximately $140 million in Q4 sales, up 7% over the same quarter in 2020 [16] - Real Living sales increased over 20% versus Q4 of last year [16] - Furniture sales experienced a drop due to inventory availability, but the company is now in a better inventory position for Broyhill upholstery and mattresses [37] Market Data and Key Metrics Changes - The company opened 16 new stores and closed nine stores, ending Q4 with 1,431 stores [48] - The company expects to meet or exceed 50 net new stores in 2022, targeting margin accretive stores with 10% EBITDA returns [20] Company Strategy and Development Direction - The company aims to grow top-line sales by several billion dollars through merchandising productivity, real estate growth, and e-commerce [8] - The focus is on enhancing the customer experience through improved inventory management and seasonal offerings [15][21] - The company is committed to operational excellence and shareholder value through strategic investments and growth initiatives [7][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential despite near-term challenges, targeting sales of $8 billion to $10 billion in the coming years [31][62] - The company anticipates a flat comparable sales growth for 2022, with net new stores contributing to overall growth [95][96] - Management acknowledged the impact of supply chain disruptions and inflation on costs and margins, with plans to address shrink issues [70][82] Other Important Information - The company returned approximately $460 million to shareholders in 2021 through dividends and share repurchases [51] - The average cost of the Project Refresh program is just over $100,000 per store, aimed at enhancing the in-store experience [27] Q&A Session Summary Question: Can you discuss the improved sales momentum in February and its impact on inventory planning? - Management noted a significant recovery in February compared to January, with plans to be heavier on seasonal and furniture inventory [65][66] Question: What drove the SG&A dollar growth and the expected improvement in gross margins? - Management indicated that the higher SG&A was due to structural changes and transitory issues, with expectations to reduce shrink rates over the year [69][70] Question: Can you explain the inventory and shrink situation? - Management detailed that the spike in shrink was influenced by external factors, particularly in California, and outlined steps to mitigate these issues [76][79] Question: What is the outlook for close-out sales and availability? - Management confirmed that close-outs are becoming a larger part of the business, with good availability in certain categories [85][86] Question: How is the furniture category performing and what are the expectations moving forward? - Management reported strong sales in furniture, particularly with the Broyhill brand, and expressed confidence in recovering inventory levels [90][91]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 001-08897 BIG LOTS, INC. (Exact name of registrant as specified in its charter) Ohio 06-1119097 (Stat ...

Financial Data and Key Metrics Changes - Net sales for Q3 were $1.336 billion, a 3.1% decrease compared to $1.378 billion a year ago, but up 14.4% compared to Q3 2019 [45] - The net loss for Q3 was $4.3 million compared to a net income of $29.9 million in Q3 2020, with EPS at a loss of $0.14 [46] - Gross margin rate for Q3 was 38.9%, down 160 basis points from last year's rate and 80 basis points below 2019 [47] - Total expenses for the quarter were $523 million, up from $515 million last year, driven by incremental investments in labor and forward distribution centers [48] Business Line Data and Key Metrics Changes - Comparable sales increased 12% on a two-year basis, while total sales increased over 14% versus 2019 [7] - Furniture delivered strong performance with two-year comps up low double-digits, while Seasonal comps were over 30% on a two-year basis [10] - Consumables experienced single-digit, two-year growth, with food down mid-single-digits due to strategic reduction in square footage [10][101] Market Data and Key Metrics Changes - The company opened 9 new stores and closed 3, ending Q3 with 1,424 stores and total selling square footage of 32.5 million [52] - Year-to-date e-commerce sales growth was around 300% compared to 2019, with expectations for e-commerce to become a billion-dollar business in the coming years [31] Company Strategy and Development Direction - The company is focused on three key drivers for growth: same-store sales growth, accelerated store footprint growth, and scaling e-commerce operations [19] - A new $250 million share repurchase program was authorized, reflecting confidence in the company's growth story [5] - The company plans to enhance its merchandise assortment and expand its seasonal offerings to drive sales [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fourth quarter despite supply chain challenges, anticipating high sell-through of holiday merchandise [11] - The company expects to face negative comps in Q1 2022 due to the lapping of stimulus effects but anticipates overall sales growth for the year [18] - Management highlighted the importance of supply chain investments to improve product availability and efficiency [92] Other Important Information - The company declared a quarterly cash dividend of $0.30 per common share, payable on December 29, 2021 [56] - Capital expenditures for the quarter were $46 million, with full-year expectations between $170 and $180 million [66] Q&A Session Summary Question: Can you talk about the supply chain challenges and sales cadence in Q4? - Management noted ongoing supply chain difficulties, particularly in Asia, but emphasized successful mitigation efforts to ensure holiday inventory availability [71][73] Question: What are the return metrics targeted for new stores? - The company expects new stores to achieve a 10% or greater 4-wall EBITDA margin, with internal rates of return ideally in the mid-20s [78] Question: How is the Food and Consumables strategy evolving? - Management indicated a focus on refining the food assortment to enhance productivity, despite not seeing positive comps in the last quarter [100][104]

Part I. Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited consolidated financial statements detail its operational results, financial position, and cash flows [Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This statement outlines the company's revenues, expenses, and resulting net income for the specified periods Consolidated Statements of Operations and Comprehensive Income (Unaudited) | Metric | Thirteen Weeks Ended July 31, 2021 ($ in thousands) | Thirteen Weeks Ended August 1, 2020 ($ in thousands) | Twenty-Six Weeks Ended July 31, 2021 ($ in thousands) | Twenty-Six Weeks Ended August 1, 2020 ($ in thousands) | | :------------------------------------------------------- | :---------------------------------------------------- | :--------------------------------------------------- | :---------------------------------------------------- | :--------------------------------------------------- | | Net Sales | 1,457,374 | 1,644,197 | 3,082,926 | 3,083,346 | | Gross Margin | 577,797 | 683,564 | 1,231,744 | 1,254,320 | | Operating Profit | 53,850 | 608,643 | 176,402 | 683,078 | | Net Income and Comprehensive Income | 37,707 | 451,972 | 132,270 | 501,295 | | Basic EPS | 1.11 | 11.52 | 3.81 | 12.79 | | Diluted EPS | 1.09 | 11.29 | 3.75 | 12.66 | | Cash Dividends Declared per Common Share | 0.30 | 0.30 | 0.60 | 0.60 | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity Consolidated Balance Sheets (Unaudited) | Metric | July 31, 2021 ($ in thousands) | January 30, 2021 ($ in thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------ | | Cash and Cash Equivalents | 293,322 | 559,556 | | Inventories | 943,776 | 940,294 | | Total Current Assets | 1,379,164 | 1,585,789 | | Total Assets | 3,822,725 | 4,037,257 | | Total Current Liabilities | 959,613 | 1,000,624 | | Long-term Debt | — | 35,764 | | Total Shareholders' Equity | 1,153,369 | 1,277,731 | | Total Liabilities and Shareholders' Equity | 3,822,725 | 4,037,257 | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) This statement details the changes in the company's equity accounts over the specified period Consolidated Statements of Shareholders' Equity (Unaudited) - Twenty-Six Weeks Ended July 31, 2021 | Metric | January 30, 2021 ($ in thousands) | July 31, 2021 ($ in thousands) | | :---------------------------------- | :------------------------------ | :----------------------------- | | Balance | 1,277,731 | 1,153,369 | | Comprehensive Income | 132,270 | 132,270 | | Dividends Declared | (21,817) | (21,817) | | Purchases of Common Shares | (257,818) | (257,818) | | Share-based Employee Compensation Expense | 22,944 | 22,944 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by operating, investing, and financing activities Consolidated Statements of Cash Flows (Unaudited) - Twenty-Six Weeks Ended | Metric | July 31, 2021 ($ in thousands) | August 1, 2020 ($ in thousands) | | :------------------------------------------ | :----------------------------- | :------------------------------ | | Net Income | 132,270 | 501,295 | | Net Cash Provided by Operating Activities | 142,158 | 468,384 | | Net Cash (Used in) Provided by Investing Activities | (77,086) | 517,586 | | Net Cash Used in Financing Activities | (331,306) | (140,131) | | (Decrease) Increase in Cash and Cash Equivalents | (266,234) | 845,839 | | Cash and Cash Equivalents: End of Period | 293,322 | 898,560 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide supplementary information and disclosures related to the consolidated financial statements [NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company operates as a neighborhood discount retailer with 1,418 stores and an e-commerce platform - As of July 31, 2021, Big Lots, Inc operated **1,418 stores** in 47 states and an e-commerce platform[15](index=15&type=chunk) - In year-to-date 2021, Big Lots realigned its merchandise categories, renaming 'Electronics, Toys, & Accessories' to 'Apparel, Electronics, & Other' and reclassifying several departments to better align with management reporting[22](index=22&type=chunk)[23](index=23&type=chunk) Warehousing, Distribution, and Outbound Transportation Costs | Period | 2021 ($ in millions) | 2020 ($ in millions) | | :------- | :------------------- | :------------------- | | Q2 | 71.9 | 59.7 | | YTD | 138.1 | 112.0 | Advertising Expenses | Period | 2021 ($ in millions) | 2020 ($ in millions) | | :------- | :------------------- | :------------------- | | Q2 | 21.9 | 21.9 | | YTD | 43.8 | 44.8 | [NOTE 2 – DEBT](index=10&type=section&id=NOTE%202%20%E2%80%93%20DEBT) The company maintains a $700 million credit facility and prepaid its remaining term note in June 2021 - As of July 31, 2021, Big Lots had **no borrowings outstanding** under its $700 million unsecured credit facility, with **$690.9 million available**[27](index=27&type=chunk) - The company prepaid the remaining **$44.3 million principal balance** of the 2019 Term Note on June 7, 2021, incurring a $0.4 million prepayment fee and recognizing a **$0.5 million loss** on debt extinguishment[28](index=28&type=chunk) Total Debt | Instrument | July 31, 2021 ($ in thousands) | January 30, 2021 ($ in thousands) | | :----------- | :----------------------------- | :------------------------------ | | 2019 Term Note | — | 50,264 | | Credit Agreement | — | — | | **Total Debt** | **—** | **50,264** | [NOTE 3 – FAIR VALUE MEASUREMENTS](index=11&type=section&id=NOTE%203%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) The company's investments in money market and mutual funds are recorded at fair value using Level 1 inputs Fair Value of Investments (July 31, 2021) | Asset | Balance Sheet Location | Fair Value ($ in thousands) | | :---------------------------------- | :----------------------- | :-------------------------- | | Money market funds | Cash and cash equivalents | 35,038 | | Mutual funds - deferred compensation plan | Other current assets | 27,354 | Fair Value of Investments (January 30, 2021) | Asset | Balance Sheet Location | Fair Value ($ in thousands) | | :---------------------------------- | :----------------------- | :-------------------------- | | Money market funds | Cash and cash equivalents | 175,113 | | Mutual funds - deferred compensation plan | Other Assets | 32,484 | [NOTE 4 – SHAREHOLDERS' EQUITY](index=12&type=section&id=NOTE%204%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) The company executed share repurchases under a $500 million program and paid consistent quarterly dividends - The Board of Directors authorized a **$500 million share repurchase program** on August 27, 2020, with no scheduled termination date[37](index=37&type=chunk) - As of July 31, 2021, **$96.8 million was available** for future repurchases under the 2020 Repurchase Authorization[38](index=38&type=chunk) Common Shares Repurchased (Year-to-Date 2021) | Period | Number of Shares Repurchased (in thousands) | Amount of Repurchased Shares (in thousands) | | :--------------- | :---------------------------------------- | :------------------------------------------ | | First quarter | 1,149 | 77,533 | | Second quarter | 2,405 | 152,883 | | **Total** | **3,554** | **230,416** | Cash Dividends Declared and Paid (2021) | Period | Dividends Per Share | Amount Declared ($ in thousands) | Amount Paid ($ in thousands) | | :--------------- | :------------------ | :----------------------------- | :--------------------------- | | First quarter | $0.30 | 11,206 | 12,460 | | Second quarter | $0.30 | 10,611 | 10,204 | | **Total** | **$0.60** | **21,817** | **22,664** | [NOTE 5 – SHARE-BASED PLANS](index=13&type=section&id=NOTE%205%20%E2%80%93%20SHARE-BASED%20PLANS) Share-based compensation expense increased significantly year-over-year due to vesting of performance-based awards - All Performance Restricted Share Units (PRSUs) awarded in 2020 **vested in the year-to-date 2021**[45](index=45&type=chunk) - The total unearned compensation cost related to all share-based awards outstanding (excluding 2021 PSUs) at July 31, 2021, was approximately **$37.0 million**, with a weighted-average remaining expense recognition period of approximately **1.6 years**[53](index=53&type=chunk) Share-based Compensation Expense | Period | Q2 2021 ($ in millions) | Q2 2020 ($ in millions) | YTD 2021 ($ in millions) | YTD 2020 ($ in millions) | | :------- | :---------------------- | :---------------------- | :----------------------- | :----------------------- | | Expense | 11.0 | 4.5 | 22.9 | 7.4 | Non-vested Restricted Stock Units Activity (Year-to-Date 2021) | Activity | Number of Shares | Weighted Average Grant-Date Fair Value Per Share | | :------------------------------------------------ | :--------------- | :----------------------------------------------- | | Outstanding at January 30, 2021 | 1,214,212 | $22.71 | | Granted | 241,532 | $69.07 | | Vested | (427,570) | $24.27 | | Forfeited | (44,032) | $25.35 | | Outstanding at July 31, 2021 | 984,142 | $33.77 | [NOTE 6 – INCOME TAXES](index=15&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) The company anticipates a net decrease in unrecognized tax benefits over the next 12 months - The estimated net decrease in unrecognized tax benefits for the next 12 months is approximately **$4.0 million**[54](index=54&type=chunk) [NOTE 7 – CONTINGENCIES](index=15&type=section&id=NOTE%207%20%E2%80%93%20CONTINGENCIES) The company is involved in various legal actions which are not expected to have a material financial impact - Management believes current legal actions and claims will be resolved **without a material effect** on the company's financial condition, results of operations, or liquidity[55](index=55&type=chunk) [NOTE 8 – BUSINESS SEGMENT DATA](index=15&type=section&id=NOTE%208%20%E2%80%93%20BUSINESS%20SEGMENT%20DATA) Net sales are reported across seven merchandise categories, with most showing a decline in Q2 2021 - The company's seven merchandise categories are Food, Consumables, Soft Home, Hard Home, Furniture, Seasonal, and Apparel, Electronics, & Other[56](index=56&type=chunk) Net Sales by Merchandise Category (Second Quarter) | Category | 2021 ($ in thousands) | 2020 ($ in thousands) | Change ($ in thousands) | Change (%) | | :---------------------------- | :-------------------- | :-------------------- | :---------------------- | :--------- | | Furniture | 409,078 | 439,737 | (30,659) | (7.0)% | | Seasonal | 259,682 | 299,700 | (40,018) | (13.4)% | | Soft Home | 183,249 | 242,664 | (59,415) | (24.5)% | | Food | 178,167 | 205,797 | (27,630) | (13.4)% | | Consumables | 159,301 | 177,236 | (17,935) | (10.1)% | | Hard Home | 145,241 | 174,291 | (29,050) | (16.7)% | | Apparel, Electronics, & Other | 122,656 | 104,772 | 17,884 | 17.1% | | **Net Sales** | **1,457,374** | **1,644,197** | **(186,823)** | **(11.4)%** | [NOTE 9 – GAIN ON SALE OF DISTRIBUTION CENTERS](index=15&type=section&id=NOTE%209%20%E2%80%93%20GAIN%20ON%20SALE%20OF%20DISTRIBUTION%20CENTERS) The company generated a significant gain from the sale and leaseback of four distribution centers in 2020 - On June 12, 2020, Big Lots completed sale and leaseback transactions for four distribution centers, with an aggregate sale price of **$725.0 million**[58](index=58&type=chunk) - The transactions resulted in an aggregate gain on sales of **$463.1 million** and **$134.0 million** in financing liability proceeds[58](index=58&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides its perspective on financial performance, condition, and future outlook [CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS](index=16&type=section&id=CAUTIONARY%20STATEMENT%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section outlines the risks and uncertainties associated with the company's forward-looking statements - Forward-looking statements are identified by terms such as "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," and "outlook"[60](index=60&type=chunk) - Actual results may differ materially due to various factors, including developments related to the **COVID-19 pandemic**, economic conditions, cost of goods, execution of strategic initiatives, competitive pressures, and **supply chain issues**[61](index=61&type=chunk) [OVERVIEW](index=17&type=section&id=OVERVIEW) This section provides a summary of key operating performance indicators for the second quarter - The Q2 2020 operating profit and diluted EPS were significantly boosted by a **$463.1 million pre-tax gain** on the sale of distribution centers, which contributed approximately **$8.54 per share** to diluted EPS[64](index=64&type=chunk) Key Operating Performance Indicators (Q2 2021 vs. Q2 2020) | Metric | Q2 2021 | Q2 2020 | Change ($ in millions) | Change (%) | | :------------------------------------ | :------ | :------ | :--------------------- | :--------- | | Net sales | $1,457.4M | $1,644.2M | $(186.8)M | (11.4)% | | Comparable sales | N/A | N/A | $(211.3)M | (13.2)% | | Gross margin dollars | $577.8M | $683.6M | $(105.8)M | (15.5)% | | Gross margin rate | 39.6% | 41.6% | (200 bps) | N/A | | Selling and administrative expenses | $488.7M | $504.0M | $(15.3)M | (3.0)% | | Selling and administrative expenses (% of net sales) | 33.5% | 30.7% | 280 bps | N/A | | Operating profit | $53.9M | $608.6M | $(554.7)M | (91.1)% | | Diluted earnings per share | $1.09 | $11.29 | $(10.20) | (90.3)% | | Cash and cash equivalents | $293.3M | $898.5M | $(605.2)M | (67.4)% | | Inventory | $943.8M | $713.5M | $230.3M | 32.3% | | Long-term debt | $0 | $43.1M | $(43.1)M | (100.0)% | | Cash dividends declared per common share | $0.30 | $0.30 | $0 | 0.0% | | Common shares acquired | 2.4M | N/A | N/A | N/A | [STORES](index=17&type=section&id=STORES) This section details the changes in the company's store count during the year-to-date period - The company expects its store count to **increase by approximately 20 stores** by the end of fiscal year 2021 compared to the end of 2020[66](index=66&type=chunk) Stores Opened and Closed (Year-to-Date) | Metric | 2021 | 2020 | | :------------------------------------ | :--- | :--- | | Stores open at the beginning of the fiscal year | 1,408 | 1,404 | | Stores opened during the period | 25 | 11 | | Stores closed during the period | (15) | (11) | | **Stores open at the end of the period** | **1,418** | **1,404** | [RESULTS OF OPERATIONS](index=18&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed comparison of operational results for the second quarter and year-to-date periods [SECOND QUARTER OF 2021 COMPARED TO SECOND QUARTER OF 2020](index=18&type=section&id=SECOND%20QUARTER%20OF%202021%20COMPARED%20TO%20SECOND%20QUARTER%20OF%202020) Q2 net sales and gross margin declined due to lapping prior-year stimulus and rising freight costs - The decrease in net sales and comparable sales was primarily driven by the larger impact of **government stimulus** on consumer behavior during Q2 2020 and the easing of COVID-19 nesting trends in Q2 2021[71](index=71&type=chunk)[72](index=72&type=chunk) - Gross margin rate **decreased 200 basis points to 39.6%** primarily due to higher inbound freight costs, exacerbated by increased ocean carriage rates and domestic transportation rates, partially offset by a lower markdown rate[75](index=75&type=chunk) - Selling and administrative expenses decreased by $15.3 million but **increased 280 basis points** as a percentage of net sales, driven by lower store payroll (absence of temporary wage increase), lower bonus expense, and absence of sale and leaseback transaction expenses, partially offset by increased distribution/transportation costs and share-based compensation[76](index=76&type=chunk)[78](index=78&type=chunk) Net Sales and Comparable Sales by Merchandise Category (Q2 2021 vs. Q2 2020) | Category | Q2 2021 Net Sales ($ in thousands) | Q2 2020 Net Sales ($ in thousands) | Net Sales Change (%) | Comps Change (%) | | :---------------------------- | :--------------------------------- | :--------------------------------- | :------------------- | :--------------- | | Furniture | 409,078 | 439,737 | (7.0)% | (9.5)% | | Seasonal | 259,682 | 299,700 | (13.4)% | (14.6)% | | Soft Home | 183,249 | 242,664 | (24.5)% | (26.1)% | | Food | 178,167 | 205,797 | (13.4)% | (14.9)% | | Consumables | 159,301 | 177,236 | (10.1)% | (11.4)% | | Hard Home | 145,241 | 174,291 | (16.7)% | (18.0)% | | Apparel, Electronics, & Other | 122,656 | 104,772 | 17.1% | 15.2% | | **Total Net Sales** | **1,457,374** | **1,644,197** | **(11.4)%** | **(13.2)%** | [YEAR-TO-DATE 2021 COMPARED TO YEAR-TO-DATE 2020](index=21&type=section&id=YEAR-TO-DATE%202021%20COMPARED%20TO%20YEAR-TO-DATE%202020) Year-to-date net sales were flat as higher freight and operating costs compressed profitability - Year-to-date net sales were flat, with a **1.7% comparable sales decrease** offset by a **$51.6 million increase** from non-comparable sales (new/relocated stores)[85](index=85&type=chunk) - Gross margin rate **decreased 70 basis points to 40.0%** primarily due to higher inbound freight costs, including ocean carriage rates, domestic transportation rates, fuel costs, and detention/demurrage charges[89](index=89&type=chunk) - Selling and administrative expenses **increased $23.5 million**, or 80 basis points as a percentage of net sales, driven by higher distribution and transportation costs, increased share-based compensation, and higher store occupancy costs, partially offset by lower store-related payroll and the absence of prior year's sale and leaseback transaction expenses and proxy contest costs[90](index=90&type=chunk)[91](index=91&type=chunk) Net Sales and Comparable Sales by Merchandise Category (YTD 2021 vs. YTD 2020) | Category | YTD 2021 Net Sales ($ in thousands) | YTD 2020 Net Sales ($ in thousands) | Net Sales Change (%) | Comps Change (%) | | :---------------------------- | :-------------------------------- | :-------------------------------- | :------------------- | :--------------- | | Furniture | 890,509 | 855,438 | 4.1% | 1.8% | | Seasonal | 563,600 | 496,021 | 13.6% | 12.2% | | Soft Home | 407,103 | 439,416 | (7.4)% | (9.0)% | | Food | 358,464 | 420,911 | (14.8)% | (16.0)% | | Consumables | 321,689 | 372,931 | (13.7)% | (14.8)% | | Hard Home | 297,002 | 304,834 | (2.6)% | (4.0)% | | Apparel, Electronics, & Other | 244,559 | 193,795 | 26.2% | 24.4% | | **Total Net Sales** | **3,082,926** | **3,083,346** | **0.0%** | **(1.7)%** | [2021 Guidance](index=23&type=section&id=2021%20Guidance) The company provides its financial outlook for the third quarter and full fiscal year 2021 - The company anticipates significant **supply chain challenges** (COVID-19 related shutdowns) and a highly competitive domestic labor market (increased payroll expenses) to adversely impact net sales and gross margin in Q3 and Q4 2021[98](index=98&type=chunk) Q3 2021 Guidance (excluding share repurchases) | Metric | Guidance | | :------------------------------------ | :------------------------------------ | | Comparable sales | Decline in the mid-single digits | | Gross margin rate | Down approximately 175 basis points (due to freight) | | Selling and administrative expenses | Up slightly | | Diluted loss per share | $0.10 to $0.20 | Full Year 2021 Guidance (excluding share repurchases) | Metric | Guidance | | :------------------------------------ | :------------------------------------ | | Comparable sales | Decline in the low single digits | | Gross margin rate | Down approximately 100 basis points | | Selling and administrative expenses | Up | | Diluted earnings per share | $5.90 to $6.05 | [Capital Resources and Liquidity](index=23&type=section&id=Capital%20Resources%20and%20Liquidity) The company maintains strong liquidity through cash on hand and its unsecured credit facility - As of July 31, 2021, Big Lots had **$690.9 million available** under its $700 million unsecured credit facility and no outstanding borrowings[101](index=101&type=chunk) - The company prepaid the remaining **$44.3 million principal balance** of the 2019 Term Note in Q2 2021[102](index=102&type=chunk) - Big Lots intends to fund working capital, capital expenditures, share repurchases, and other commitments using **current cash and projected cash flows from operations**, without borrowing under the Credit Agreement[103](index=103&type=chunk) - Year-to-date 2021, the company purchased **3.6 million common shares for $230.4 million** under the 2020 Repurchase Authorization, with **$96.8 million remaining available** as of July 31, 2021[104](index=104&type=chunk) Cash Flow Components (YTD 2021 vs. YTD 2020) | Cash Flow Component | YTD 2021 ($ in thousands) | YTD 2020 ($ in thousands) | Change ($ in thousands) | | :------------------------------------------ | :------------------------ | :------------------------ | :---------------------- | | Net cash provided by operating activities | 142,158 | 468,384 | (326,226) | | Net cash (used in) provided by investing activities | (77,086) | 517,586 | (594,672) | | Net cash used in financing activities | (331,306) | (140,131) | (191,175) | [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=25&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) The preparation of financial statements relies on management's estimates, judgments, and assumptions - The preparation of financial statements requires management to make estimates, judgments, and assumptions that are evaluated on an ongoing basis using historical experience, current trends, and other reasonable factors[110](index=110&type=chunk) - Critical accounting policies and estimates are outlined in detail in the company's **2020 Form 10-K**[111](index=111&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk from interest rates and diesel fuel price volatility - An increase of **1% in the variable interest rate** on expected future borrowings would not currently materially affect the company's financial condition, results of operations, or liquidity[112](index=112&type=chunk) - As of July 31, 2021, the company had outstanding derivative instruments (collars) covering **2.4 million gallons of diesel fuel**[113](index=113&type=chunk) - A **10% difference** in the forward curve for diesel fuel prices could affect unrealized gains (losses) in other income (expense) by approximately **$0.8 million**[114](index=114&type=chunk) Diesel Fuel Derivatives (July 31, 2021) | Calendar Year of Maturity | Diesel Fuel Puts (Gallons, in thousands) | Diesel Fuel Calls (Gallons, in thousands) | Fair Value Asset (Liability) ($ in thousands) | | :------------------------ | :--------------------------------------- | :---------------------------------------- | :-------------------------------------------- | | 2021 | 1,200 | 1,200 | 224 | | 2022 | 1,200 | 1,200 | 404 | | **Total** | **2,400** | **2,400** | **628** | [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective - Management concluded that disclosure controls and procedures were **effective** as of July 31, 2021[115](index=115&type=chunk) - There were **no material changes** in internal control over financial reporting during the most recent fiscal quarter[116](index=116&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings are detailed in Note 7 of the financial statements - For information regarding legal proceedings, refer to **Note 7** to the accompanying consolidated financial statements[118](index=118&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to previously disclosed risk factors during the quarter - **No material changes** to the risk factors previously disclosed in the 2020 Form 10-K occurred during the second quarter of 2021[119](index=119&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 2.4 million common shares for approximately $152.9 million in Q2 2021 - During the second quarter of 2021, the company purchased **2.4 million common shares** for approximately **$152.9 million** under the 2020 Repurchase Authorization[119](index=119&type=chunk) Common Share Repurchase Activity (Q2 2021) | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans (in thousands) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (in thousands) | | :-------------------------- | :-------------------------------------------- | :--------------------------- | :---------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------ | | May 2, 2021 - May 29, 2021 | 46 | $69.07 | 42 | 246,750 | | May 30, 2021 - June 26, 2021 | 1,521 | $65.81 | 1,519 | 146,750 | | June 27, 2021 - July 31, 2021 | 844 | $59.26 | 844 | 96,751 | | **Total** | **2,411** | **$63.58** | **2,405** | **96,751** | [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were **no defaults** upon senior securities[120](index=120&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - There were **no mine safety disclosures**[120](index=120&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The company reported no other information - There was **no other information** to report[120](index=120&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including award agreements and officer certifications - Exhibits include Form of Big Lots 2020 Long-Term Incentive Plan Performance Share Units Award Agreement and Restricted Stock Units Award Agreement[123](index=123&type=chunk) - Certifications of Principal Executive Officer and Principal Financial Officer pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002** are filed as exhibits[123](index=123&type=chunk) - **XBRL Taxonomy** Definition, Presentation, Labels, Calculation, and Schema Linkbase Documents are included[123](index=123&type=chunk)

Big Lots, Inc. (NYSE:BIG) Q2 2021 Earnings Conference Call August 27, 2021 8:00 AM ET Company Participants Bruce Thorn - President and Chief Executive Officer Jonathan Ramsden - Executive Vice President, Chief Financial and Administrative Officer Conference Call Participants Spencer Hanus - Wolfe Research Peter Keith - Piper Sandler Joe Feldman - Telsey Advisory Group Jason Haas - Bank of America Anthony Chukumba - Loop Capital Brad Thomas - KeyBanc Capital Markets Operator Ladies and gentlemen, good mornin ...

| --- | --- | --- | |-------|-------|-------| | | | | | | | | | Re | | | FORWARD LOOKING STATEMENTS Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "tarqet," "forecast," "guidance," " ...