Big Lots(BIG) - 2024 Q3 - Quarterly Report

Financial Performance - Net loss for the thirty-nine weeks ended October 28, 2023, was $451.2 million, compared to a net loss of$198.2 million for the same period in 2022[12] - Net sales for the thirty-nine weeks ended October 28, 2023, were $3.29 billion, a decrease from$3.93 billion in the same period in 2022[27] - Gross margin for the thirty-nine weeks ended October 28, 2023, was $1.14 billion, down from$1.35 billion in the same period in 2022[27] - Net sales for Q3 2023 were $1.03 billion, down from$1.20 billion in Q3 2022, with significant declines in the Furniture and Seasonal categories[131] - Net sales decreased by $177.6 million, or 14.7$635.6 million, or 16.2%, year-to-date in 2023 compared to 2022, driven by a 15.5% decrease in comparable sales[177] - Net sales decreased by $177.6 million (14.7$1,026.7 million in Q3 2023 compared to $1,204.3 million in Q3 2022, driven by a 13.2$150.0 million (13.2%) in Q3 2023, primarily due to a net decrease of 29 stores since Q3 2022[170] - Gross margin improved to 36.4% in Q3 2023 from 34.0% in Q3 2022, reflecting better cost management and operational efficiency[115] - Gross margin rate increased by 240 basis points to 36.4% of net sales, despite a $35.6 million decrease in gross margin dollars[141] - Earnings per share (diluted) for the thirty-nine weeks ended October 28, 2023, were$(15.49), compared to $(6.88) in the same period in 2022[27] - Comprehensive income for the 13 weeks ended October 28, 2023, was$29,192[31] - High inflation and post-COVID consumer spending shifts negatively impacted discretionary spending, particularly for high-ticket products, with expectations of continued impact in Q4 2023[190] Debt and Credit Facilities - The company's borrowing base under the 2022 Credit Agreement was $870.5 million as of October 28, 2023, with$533.0 million in borrowings outstanding and $38.9 million committed to letters of credit, leaving$298.6 million available[166] - The company's long-term debt increased to $533.0 million as of October 28, 2023, compared to$301.4 million in the previous period[7] - The 2022 Credit Agreement provides an aggregate committed amount of up to $900 million, with$211.5 million available as of October 28, 2023[47] - As of October 28, 2023, the company had a Borrowing Base of $870.5 million under the 2022 Credit Agreement, with$533.0 million in borrowings outstanding and $38.9 million committed to letters of credit, leaving$298.6 million available[63] - The company completed a five-year asset-based revolving credit facility of up to $900 million, expiring on September 21, 2027[165] - The company issued$16.2 million in 2023 Term Notes, secured by unearned prepaid insurance premiums, with annual interest rates ranging from 7.1% to 8.5%[65] - Interest expense increased to $13.6 million in Q3 2023 from$6.3 million in Q3 2022, primarily due to higher total average borrowings of $605.8 million compared to$479.8 million in Q3 2022[149] - Interest expense increased to $33.9 million year-to-date in 2023, up from$12.9 million in 2022, due to higher borrowings and interest rates[187] - Cash paid for interest in the third quarter of 2023 was $32,339[42] - Gross proceeds from long-term debt in the third quarter of 2023 were$1,367,000[42] Cash Flow and Liquidity - Cash used in operating activities increased by $120.1 million to$399.1 million in the year-to-date 2023 compared to $279.0 million in the year-to-date 2022[198] - Net cash used in operating activities for the thirty-nine weeks ended October 28, 2023, was$399.1 million, compared to $279.0 million in the same period in 2022[12] - Cash and cash equivalents at the end of the period on October 28, 2023, were$46.6 million, compared to $44.7 million at the beginning of the period[12] - Cash provided by investing activities increased by$419.2 million to $294.3 million in year-to-date 2023, driven by real estate sale proceeds and decreased capital expenditures[221] - The company paid$9.8 million in dividends in the year-to-date 2023, a decrease from $28.3 million in the year-to-date 2022 due to the suspension of quarterly cash dividends in the second quarter of 2023[219] - Dividends declared for the 39 weeks ended October 28, 2023, totaled$7,572[31] - The company had $159.4 million available for future share repurchases under the 2021 Repurchase Authorization as of October 28, 2023[70] - The 2021 Repurchase Authorization had$159.4 million remaining at October 28, 2023, with no repurchases made in Q3 2023[203] Real Estate Transactions - Gain on sale of real estate increased by $210.3 million to$211.9 million in the year-to-date 2023, primarily due to the completion of sale and leaseback transactions for 23 store locations and AVDC[186] - The company completed the sale of two owned store locations in 2023, resulting in a gain of $7.1 million[18] - The company completed sale and leaseback transactions for its Apple Valley, CA distribution center and 23 owned store locations with an aggregate net book value of$123.1 million[40] - The aggregate sale price for the AVDC and 23 store sale and leaseback transactions was $305.7 million, with aggregate net proceeds of$332.1 million[106] - Aggregate initial annual cash payments for AVDC and the Sale and leaseback Stores are approximately $24 million, escalating 2$204.7 million and approximately $201 million in net cash proceeds[139][148] - The 2023 Synthetic Lease related to AVDC was terminated and paid off for approximately$101 million on August 25, 2023[217] Asset Impairment and Depreciation - The company recorded aggregate asset impairment charges of $54.0 million related to 171 store locations in the third quarter of 2023[15] - The company recorded aggregate asset impairment charges of$136.9 million related to 332 store locations in year-to-date 2023[39] - Depreciation expense as a percentage of sales increased by 10 basis points compared to the third quarter of 2022[175] - Depreciation expense decreased by $4.2 million to$33.1 million in Q3 2023, compared to $37.3 million in Q3 2022, driven by the absence of FDC-related depreciation and asset impairment charges[147] Operating Expenses - Selling and administrative expenses increased by$22.7 million to $525.7 million in Q3 2023, driven by higher store asset impairment charges and professional fees[121] - Selling and administrative expenses increased by$110.9 million year-to-date in 2023, driven by store asset impairment charges and lease payments[158] - Selling and administrative expenses increased by $22.7 million to$525.7 million, representing 51.2% of net sales, up 940 basis points[141] - Store payroll costs decreased by $3.2 million in Q3 2023, driven by a lower store count and reduced headcount compared to Q3 2022[121] - Distribution and outbound transportation costs were$73.7 million for the third quarter of 2023[41] - Advertising expenses were $17.9 million for Q3 2023, down from$20.9 million in Q3 2022, and $62.2 million year-to-date 2023, down from$64.3 million year-to-date 2022[58] - Share-based compensation expense was $1.1 million in Q3 2023, down from$3.9 million in Q3 2022, and $9.6 million year-to-date 2023, down from$11.4 million year-to-date 2022[72] - The company reversed $2.6 million of previously recorded expense associated with 2022 RSUs due to estimated performance below the minimum required threshold[73] Inventory and Supply Chain - Inventory decreased by 12.5$167.9 million, primarily due to a 7% decrease in units on hand and a 4% decrease in average unit cost[141] - The supply chain finance (SCF) program had a revolving capacity of $30.0 million as of October 28, 2023, down from$55.0 million as of January 28, 2023[131] - Amounts under the SCF program included within accounts payable were $4.7 million as of October 28, 2023, down from$35.4 million as of January 28, 2023[105] Store Operations - The company operated 1,428 stores in 48 states and an e-commerce platform as of October 28, 2023[14] - Stores open at the end of the period were 1,428, up from 1,425 at the beginning of the fiscal year, with 12 stores opened and 9 closed during the year-to-date 2023[113] - The Furniture category sales decreased to $276.3 million in Q3 2023 from$335.2 million in Q3 2022, impacted by reduced demand for large-ticket items[131] - Seasonal category sales dropped to $115.5 million in Q3 2023 from$137.0 million in Q3 2022, due to lower sales in lawn & garden and summer departments[119] - Food and Consumables categories experienced decreases in comps and net sales in Q3 2023 but performed better than home products categories, which are more sensitive to discretionary spending[172] - Home products categories (Furniture, Seasonal, Soft Home, Hard Home) were most impacted by decreased comps and net sales in year-to-date 2023, particularly due to a shortage of Broyhill® branded products[179] - In-stock levels of Broyhill® branded products returned to normal in Q3 2023, leading to improved Furniture sales trends compared to the first half of the year[179] Share-Based Compensation and Equity - The company awarded SVCA PSUs to certain members of management, with vesting based on share price performance goals over a three-year contractual term[80] - Outstanding TSR PSUs and SVCA PSUs at October 28, 2023, totaled 961,680 units with a weighted average grant-date value per share of $8.24[82] - Outstanding non-vested RSUs at October 28, 2023 were 1,859,228 shares with a weighted average grant date fair value of$18.19 per share[89] - The 2023 PSU awards were issued with three distinct annual financial performance objectives, with the second and third tranches to be established at the beginning of fiscal years 2024 and 2025 respectively[91] - Total unearned compensation expense related to all share-based awards outstanding at October 28, 2023 was approximately $24.8 million, expected to be recognized through October 2026[99] Tax and Valuation Allowances - The company recorded a valuation allowance of$145.8 million year-to-date in 2023 for deferred tax assets due to uncertainty in realizing loss carryforwards[127] - The estimated net decrease in unrecognized tax benefits for the next 12 months is approximately $2.0 million[83] Other Financial Metrics - The company's total liabilities and shareholders' equity decreased to$3,625,489 as of October 28, 2023, from $3,690,931 in the previous period[7] - The company's retained earnings decreased to$2,781,454 as of October 28, 2023, from $3,240,193 in the previous period[7] - The company's total current liabilities decreased to$912,176 as of October 28, 2023, from $919,854 in the previous period[7] - The company's noncurrent operating lease liabilities increased to$1,674,314 as of October 28, 2023, from $1,514,009 in the previous period[7] - The weighted average discount rate for the leases was 10.6$224.2 million and right-of-use assets of $260.6 million recorded at commencement[134] - Other income (expense) was$0.0 million in year-to-date 2023, compared to $1.4 million in year-to-date 2022, due to the absence of diesel fuel derivatives[188] Capital Expenditures - Capital expenditures for the thirty-nine weeks ended October 28, 2023, were$45.0 million, a decrease from $127.4 million in the same period in 2022[12] Lease and Financing Agreements - The company entered into a Participation Agreement on March 15, 2023, with Participants funding$100 million to finance the purchase of the Apple Valley, CA distribution center[67] - The company recognized $13.4 million of FDC closing costs and$53.6 million of costs related to the exit from its Prior Synthetic Lease in year-to-date 2023[41] - The company paid a termination fee of approximately $53.4 million to terminate the Prior Synthetic Lease, using borrowings under the 2022 Credit Agreement[51] - The company adopted ASU 2022-04 in fiscal year 2023, requiring enhanced disclosures about supplier finance programs[43]