Big Lots(US:BIG)2024-09-12 20:48Financial Performance - Net sales decreased by $92.8 million, or 8.1%, in Q2 2024 compared to Q2 2023[121] - Comparable sales for stores open at least fifteen months, plus e-commerce net sales, decreased by $57.5 million, or 5.3%[121] - Year-to-date net sales decreased by $207.3 million, or 9.2%, to $2,055.7 million in 2024, with a 7.6% decline in comparable store sales contributing to this decrease[138] - Net sales decreased by $92.8 million, or 8.1%, to $1,046.6 million in Q2 2024 compared to Q2 2023, primarily due to a 5.3% decrease in comparable store sales[127] Gross Margin and Expenses - Gross margin rate increased by 190 basis points to 34.9% of net sales, despite a decrease in gross margin dollars by $10.7 million[121] - Gross margin dollars decreased by $10.7 million, or 2.8%, to $365.2 million in Q2 2024, while gross margin as a percentage of net sales increased by 190 basis points to 34.9%[131] - Selling and administrative expenses increased by $93.6 million to $553.7 million, representing 52.9% of net sales, an increase of 1,250 basis points[121] - Selling and administrative expenses increased by $93.6 million, or 20.3%, to $553.7 million in Q2 2024, with expenses as a percentage of net sales rising to 52.9%[132][133] - Selling and administrative expenses for year-to-date 2024 were $1,086.7 million, a slight increase of $5.8 million from $1,080.9 million in year-to-date 2023, primarily due to store asset impairment charges of $84.5 million[143] - As a percentage of net sales, selling and administrative expenses increased by 510 basis points to 52.9% for year-to-date 2024 compared to 47.8% for year-to-date 2023[144] Debt and Financing - Long-term debt decreased from $493.2 million in Q2 2023 to $0.0 million in Q2 2024 due to the Chapter 11 filing[121] - Total debt increased by $77.8 million from $504.4 million in Q2 2023 to $582.2 million in Q2 2024[121] - The total debt of approximately $556.1 million became due and payable due to the Chapter 11 filing, resulting in all outstanding indebtedness being classified as current debt[153][154] - The company has secured approximately $550 million in debtor-in-possession financing through the DIP ABL Facility, which will be used to refinance existing commitments under the 2022 Credit Agreement[169] - The 2024 Term Loan provides for a committed amount of up to $200 million, with an initial drawdown of $50.0 million[163] - The 2024 Term Loan has an interest rate of 14.6% as of August 3, 2024, with mandatory prepayments required under certain conditions[167] - As of August 3, 2024, the company had $459.3 million in borrowings under the 2022 Credit Agreement and $115.0 million under the 2024 Term Loan, all classified as current due to Chapter 11 filings[184] Operational Changes - The company plans to close up to 315 stores in 2024, including 296 closures announced for Q3 2024[123] - The company expects to manage operations as a "debtor-in-possession" under the Bankruptcy Court's jurisdiction, allowing continued operation but restricting transactions outside the ordinary course of business[152] - The company anticipates sequential improvement in underlying comparable sales trends and gross margin rate, although it is not providing earnings guidance for the second half of 2024[150] Tax and Interest - The effective income tax rate for Q2 2024 was (0.2%), compared to (87.5%) in Q2 2023, due to a full valuation allowance on deferred assets[137] - The effective income tax rate for year-to-date 2024 was (0.1%), a significant change from (13.0%) in year-to-date 2023, due to a full valuation allowance on deferred assets[149] - Interest expense rose to $16.3 million in Q2 2024 from $11.2 million in Q2 2023, driven by higher average borrowings of $721.3 million[136] - Interest expense increased to $28.3 million in year-to-date 2024 from $20.3 million in year-to-date 2023, driven by higher average borrowings of $689.8 million compared to $606.2 million in the prior year[148] Cash Flow - Cash used in operating activities increased by $14.0 million to $164.6 million in year-to-date 2024 compared to $150.6 million in year-to-date 2023[179] - Cash used in investing activities rose by $4.7 million to $25.1 million in year-to-date 2024, driven by decreased proceeds from the sale of property and equipment[180] - Cash provided by financing activities increased by $24.5 million to $196.8 million in year-to-date 2024, attributed to net proceeds from litigation and other financing arrangements[181] - The company paid approximately $0.2 million in dividends in year-to-date 2024, a significant decrease from $9.7 million in year-to-date 2023 due to the suspension of quarterly cash dividends[177] Inventory and Product Performance - Inventory decreased by 14.8%, or $145.9 million, from $983.2 million at the end of Q2 2023 to $837.3 million at the end of Q2 2024[121] - The Furniture category showed a sequential improvement in year-to-date 2024, driven by Broyhill® branded products returning to normal in-stock levels[140] - The Food and Consumables categories performed relatively better than home products, despite experiencing decreased comps and net sales[141] - The company plans to increase Bargain and Extreme Bargain assortments in the candy and snacks departments throughout the remainder of 2024[130] Depreciation and Estimates - Depreciation expense decreased by $13.1 million to $64.8 million in year-to-date 2024, compared to $77.9 million in year-to-date 2023, primarily due to the absence of FDC related depreciation[145] - The estimates and assumptions used in the financial reporting process have a high degree of inherent uncertainty, which could materially affect the financial condition and results of operations if different estimates were applied[183]