Big Lots(BIG) - 2022 Q1 - Quarterly Report

Part I. Financial Information Financial Statements The company reported significant growth in Q1 2021 with increased sales, net income, and operating cash flow Consolidated Statements of Operations and Comprehensive Income Strong sales growth and improved gross margin drove a significant increase in operating profit and net income Consolidated Statements of Operations (Q1 2021 vs Q1 2020) | Metric | Thirteen Weeks Ended May 1, 2021 | Thirteen Weeks Ended May 2, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net sales | $1,625,552 | $1,439,149 | 13.0% | | Gross margin | $653,947 | $570,756 | 14.6% | | Operating profit | $122,552 | $74,435 | 64.7% | | Net income | $94,563 | $49,323 | 91.7% | | Diluted EPS | $2.62 | $1.26 | 107.9% | | Cash dividends per share | $0.30 | $0.30 | 0.0% | Consolidated Balance Sheets The balance sheet remained stable with a slight increase in cash and a minor decrease in shareholders' equity Consolidated Balance Sheet Highlights | Account | May 1, 2021 (in thousands) | January 30, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $613,329 | $559,556 | | Inventories | $901,482 | $940,294 | | Total current assets | $1,628,812 | $1,585,789 | | Total assets | $4,037,536 | $4,037,257 | | Total current liabilities | $1,049,919 | $1,000,624 | | Long-term debt | $32,063 | $35,764 | | Total shareholders' equity | $1,268,502 | $1,277,731 | Consolidated Statements of Shareholders' Equity Shareholders' equity slightly decreased due to share repurchases and dividends offsetting net income - Key changes in shareholders' equity for Q1 2021 included $94.6 million from comprehensive income, offset by $11.2 million in dividends and $104.5 million used for purchasing treasury shares[7] Consolidated Statements of Cash Flows Operating cash flow increased while financing activities shifted to a net use of cash due to share repurchases Consolidated Cash Flows (Q1 2021 vs Q1 2020) | Cash Flow Activity | Thirteen Weeks Ended May 1, 2021 (in thousands) | Thirteen Weeks Ended May 2, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $204,293 | $146,121 | | Net cash used in investing activities | ($32,170) | ($28,913) | | Net cash (used in) provided by financing activities | ($118,350) | $141,943 | | Increase in cash and cash equivalents | $53,773 | $259,151 | Notes to Consolidated Financial Statements (Unaudited) Notes detail store count, merchandise category realignment, credit facility status, and share repurchase activity - As of May 1, 2021, the company operated 1,413 stores in 47 states[11] - In Q1 2021, the company realigned its merchandise categories, eliminating the 'Electronics, Toys, & Accessories' category and absorbing its departments into Soft Home, Seasonal, and Hard Home categories[18][19] - The company had a $700 million unsecured credit facility with $694.2 million available as of May 1, 2021; subsequent to the quarter end, on June 7, 2021, the company prepaid the remaining $44.3 million balance on its 2019 Term Note[24][25] - Under its $500 million share repurchase authorization, the company acquired 1.1 million shares for $77.5 million in Q1 2021, leaving $249.6 million available for future repurchases[35][36] Net Sales by Merchandise Category (Q1 2021 vs Q1 2020) | Category | Q1 2021 (in thousands) | Q1 2020 (in thousands) | | :--- | :--- | :--- | | Furniture | $481,431 | $415,700 | | Seasonal | $328,794 | $215,302 | | Soft Home | $303,981 | $248,743 | | Consumables | $204,015 | $237,241 | | Food | $175,131 | $203,819 | | Hard Home | $132,200 | $118,344 | | Total Net Sales | $1,625,552 | $1,439,149 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Q1 results driven by stimulus and home-related trends, and provides Q2 guidance Overview The company highlights strong Q1 2021 performance with increased sales, improved margins, and higher EPS Key Performance Indicators (Q1 2021 vs Q1 2020) | Indicator | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales Increase | 13.0% | - | - | | Comparable Sales Increase | 11.3% | - | - | | Gross Margin Rate | 40.2% | 39.7% | +50 bps | | Operating Profit Rate | 7.5% | 5.2% | +230 bps | | Diluted EPS | $2.62 | $1.26 | +$1.36 | | Cash & Cash Equivalents | $613.3M | $311.8M | +$301.5M | Results of Operations Net sales grew due to comparable sales increases, while gross margin improved despite higher freight costs - Net sales growth was driven by an 11.3% increase in comparable sales, benefiting from government stimulus packages and continued 'nesting' trends where customers invest in their homes[68][69] - Gross margin rate increased by 50 basis points to 40.2%, primarily due to lower markdowns and a favorable product mix, which was partially offset by higher inbound freight costs[71] - Selling and administrative expenses increased by $38.8 million in absolute terms but decreased as a percentage of net sales by 130 basis points to 30.6%[72][73] Net Sales and Comparable Sales Change by Category (Q1 2021) | Category | Net Sales Change (%) | Comps Change (%) | | :--- | :--- | :--- | | Furniture | 15.8% | 13.7% | | Seasonal | 52.7% | 51.0% | | Soft Home | 22.2% | 20.6% | | Consumables | (14.0%) | (14.7%) | | Food | (14.1%) | (15.1%) | | Hard Home | 11.7% | 9.3% | | Total | 13.0% | 11.3% | 2021 Guidance The company provides Q2 2021 guidance but refrains from full-year projections due to pandemic-related uncertainty - The company is not providing full-year 2021 guidance due to uncertainty related to the COVID-19 pandemic[79] Q2 2021 Guidance | Metric | Expectation | | :--- | :--- | | Comparable Sales | Decrease in the low double digits | | Gross Margin Rate | Below last year | | Selling & Admin Expenses | Slightly below last year | | Diluted EPS | $1.00 to $1.15 | Capital Resources and Liquidity The company maintains a strong liquidity position, funding operations and shareholder returns with cash on hand - At May 1, 2021, the company had no borrowings under its $700 million credit facility and $694.2 million available[82] - The company repurchased 1.1 million common shares for $77.5 million in Q1 2021, with $249.6 million remaining under the 2020 Repurchase Authorization[85] - A quarterly cash dividend of $0.30 per share was declared and paid in Q1 2021, consistent with the prior year[86] Change in Cash Flows (Q1 2021 vs Q1 2020) | Cash Flow Activity | Change (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $58,172 | | Net cash used in investing activities | ($3,257) | | Net cash (used in) provided by financing activities | ($260,293) | Quantitative and Qualitative Disclosures About Market Risk Market risk exposure is primarily related to diesel fuel prices, with interest rate risk currently immaterial - The company had no borrowings under its Credit Agreement at May 1, 2021, so a 1% change in variable interest rates would not materially affect its financials[95] - To manage fuel cost volatility, the company had outstanding derivative collars covering 3.0 million gallons of diesel fuel as of May 1, 2021[96] - A hypothetical 10% change in the forward curve for diesel fuel prices could affect unrealized gains or losses by approximately $1.0 million[97] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material internal control changes - Based on an evaluation as of the end of the reporting period, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective[98] - No changes occurred in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[99] Part II. Other Information Legal Proceedings Ongoing legal matters are not expected to have a material impact on the company's financial condition - The company is involved in ordinary course legal actions and claims but does not expect them to have a material effect on its financial condition, results of operations, or liquidity[51][100] Risk Factors No material changes to previously disclosed risk factors were reported during the first quarter of 2021 - During the first quarter of 2021, there were no material changes to the risk factors previously disclosed in the 2020 Form 10-K[101] Unregistered Sales of Equity Securities and Use of Proceeds The company details its Q1 2021 share repurchase activities under its authorized buyback program - The 2020 Repurchase Authorization allows for the repurchase of up to $500 million of common shares and has no scheduled termination date[104] Share Repurchases in Q1 2021 | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Shares Purchased Under Plan (thousands) | Value Remaining Under Plan (thousands) | | :--- | :--- | :--- | :--- | :--- | | Jan 31 - Feb 27 | 41 | $55.25 | 39 | $325,000 | | Feb 28 - Mar 27 | 543 | $67.85 | 500 | $290,948 | | Mar 28 - May 1 | 954 | $68.56 | 610 | $249,634 | | Total | 1,538 | $67.96 | 1,149 | $249,634 | Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - There were no defaults upon senior securities[105] Mine Safety Disclosures This section is not applicable as the company has no mine safety disclosures to report - There are no mine safety disclosures[105] Other Information The company reports no other information for the period - There is no other information to report[105] Exhibits This section lists all exhibits filed with the report, including certifications and XBRL data files - Exhibits filed include award agreements, Sarbanes-Oxley Act certifications by the CEO and CFO, and XBRL taxonomy documents[108]