Big Lots(BIG) - 2023 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited consolidated financial statements for Q1 2022, including operations, balance sheets, equity, and cash flows with detailed notes Consolidated Statements of Operations and Comprehensive Income%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The company reported a net loss of $11.1 million in Q1 2022, a significant decline from prior year's net income, driven by decreased sales and an operating loss Consolidated Statements of Operations (Q1 2022 vs Q1 2021) | Metric | Thirteen Weeks Ended April 30, 2022 (in thousands) | Thirteen Weeks Ended May 1, 2021 (in thousands) | | :--- | :--- | :--- | | Net sales | $1,374,714 | $1,625,552 | | Gross margin | $504,594 | $653,947 | | Operating (loss) profit | $(13,541) | $122,552 | | Net (loss) income | $(11,082) | $94,563 | | Diluted (loss) earnings per share | $(0.39) | $2.62 | Consolidated Balance Sheets%20Consolidated%20Balance%20Sheets) Total assets increased to $4.05 billion as of April 30, 2022, primarily due to higher inventories and long-term debt, while equity slightly decreased Consolidated Balance Sheet Highlights (Unaudited) | Metric (in thousands) | April 30, 2022 | January 29, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $61,707 | $53,722 | | Inventories | $1,338,737 | $1,237,797 | | Total assets | $4,051,757 | $3,927,253 | | Liabilities & Equity | | | | Accounts payable | $488,524 | $587,496 | | Long-term debt | $270,800 | $3,500 | | Total shareholders' equity | $980,328 | $1,007,363 | Consolidated Statements of Shareholders' Equity%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity decreased to $980.3 million by April 30, 2022, primarily due to net loss, dividends, and share repurchases - Total shareholders' equity decreased by $27.0 million during Q1 2022[7] - Key activities impacting equity included a comprehensive loss of $11.1 million, $9.0 million in dividends declared, and $10.6 million in common share purchases[7] Consolidated Statements of Cash Flows%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $196.2 million in Q1 2022, a reversal from prior year, offset by $245.5 million from financing activities Consolidated Cash Flow Summary (Q1 2022 vs Q1 2021) | Activity (in thousands) | Thirteen Weeks Ended April 30, 2022 | Thirteen Weeks Ended May 1, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(196,233) | $204,293 | | Net cash used in investing activities | $(41,241) | $(32,170) | | Net cash provided by (used in) financing activities | $245,459 | $(118,350) | | Increase in cash and cash equivalents | $7,985 | $53,773 | | Cash and cash equivalents at end of period | $61,707 | $613,329 | Notes to Consolidated Financial Statements (Unaudited)%20Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section details accounting policies, debt, equity, compensation, income tax, legal contingencies, and net sales breakdown by merchandise category - The company operated 1,434 stores in 47 states and an e-commerce platform as of April 30, 2022[11] - The company had $270.8 million in outstanding borrowings under its $600 million unsecured credit facility as of April 30, 2022[21][22] - A quarterly cash dividend of $0.30 per common share was declared and paid in Q1 2022[27] Net Sales by Merchandise Category (Q1 2022 vs Q1 2021) | Category (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Furniture | $390,386 | $481,431 | | Seasonal | $234,171 | $303,918 | | Food | $176,620 | $180,297 | | Soft Home | $166,295 | $223,854 | | Consumables | $155,310 | $162,388 | | Hard Home | $129,284 | $152,198 | | Apparel, Electronics, & Other | $122,648 | $121,466 | | Total Net sales | $1,374,714 | $1,625,552 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 sales decline, gross margin compression, and operating loss due to macroeconomic factors, withdrawing full-year guidance and outlining Q2 expectations OVERVIEW Q1 2022 saw significant declines in net sales (15.4%), comparable sales (17.0%), gross margin, and diluted EPS, with a shift to operating loss Key Performance Indicators (Q1 2022 vs Q1 2021) | Metric | Change | | :--- | :--- | | Net Sales | Decreased 15.4% | | Comparable Sales | Decreased 17.0% | | Gross Margin Rate | Decreased 350 bps to 36.7% | | Operating (Loss) Profit Rate | Decreased 850 bps to (1.0)% | | Diluted EPS | Decreased to $(0.39) from $2.62 | | Inventory | Increased 48.5% YoY | RESULTS OF OPERATIONS Net sales decreased 15.4% to $1.37 billion in Q1 2022 due to lower comparable sales and macroeconomic factors, leading to an operating loss - Net sales decreased by $250.8 million (15.4%), primarily due to a 17.0% decrease in comparable sales[59] - The sales decline was caused by the absence of prior-year government stimulus payments and inflationary pressures impacting discretionary spending[60][61] - Gross margin rate decreased by 350 basis points to 36.7%, driven by higher markdowns, increased inbound freight costs, and a higher shrink rate[64] - Selling and administrative expenses decreased by $16.6 million, primarily due to lower accrued bonus and share-based compensation, partially offset by a $15.8 million increase in distribution and transportation expenses[65] Known Trends and 2022 Guidance The company withdrew full-year 2022 guidance due to inflation and uncertainty, anticipating a Q2 net loss with mid-to-high single-digit comparable sales decrease - The company lacks sufficient visibility to provide full-year 2022 guidance due to the inflationary environment negatively impacting discretionary spending[72] Q2 2022 Outlook (as of May 27, 2022) | Metric | Expected Performance vs. Q2 2021 | | :--- | :--- | | Comparable Sales | Decrease in the mid-to-high single digits | | Gross Margin Rate | In the low 30s | | Selling & Admin Expenses | Slightly up | Capital Resources and Liquidity Liquidity is primarily from operations and a $600 million credit facility, with $270.8 million drawn, and $159.4 million remaining for share repurchases - The company has a $600 million unsecured credit facility, with $270.8 million borrowed and $324.2 million available as of April 30, 2022[75][76] - As of April 30, 2022, $159.4 million remained available for future repurchases under the $250 million authorization, with no shares repurchased in Q1 2022[78] - Cash used in operating activities was $196.2 million in Q1 2022, a $400.5 million decrease from Q1 2021, driven by lower earnings and increased inventory[82] - Cash provided by financing activities was $245.5 million, a reversal from $118.4 million used in Q1 2021, due to net proceeds from long-term debt and decreased share repurchases[84] Quantitative and Qualitative Disclosures About Market Risk The company faces market risk from variable interest rates and diesel fuel prices, with a 1% rate increase potentially adding $2.7 million to annual interest expense - The company had $270.8 million in variable-rate borrowings; a 1% interest rate increase would result in approximately $2.7 million in additional annual interest expense[89] - The company is exposed to market risk from diesel fuel price changes and had outstanding derivative collars covering 0.9 million gallons at quarter-end[90] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of April 30, 2022, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the report period end[92] - No material changes occurred in internal control over financial reporting during the most recent fiscal quarter[93] Part II. Other Information Legal Proceedings The company is involved in ordinary course legal actions, but their resolution is not expected to materially affect financial condition or results - The company does not expect ordinary course legal actions to materially affect its financials[43][94] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K were reported - No material changes to the risk factors disclosed in the 2021 Form 10-K were reported during Q1 2022[95] Unregistered Sales of Equity Securities and Use of Proceeds The company acquired 280,000 common shares for tax withholdings on vested employee awards, with no repurchases under the $159.4 million remaining authorization - A total of 280,000 common shares were acquired to satisfy tax withholdings on vested employee share awards[98] - No shares were repurchased under the 2021 Repurchase Authorization during Q1, leaving $159.4 million available as of April 30, 2022[98] Defaults Upon Senior Securities, Mine Safety Disclosures, and Other Information The company reported no defaults upon senior securities, no mine safety disclosures, and no other information under Item 5 - The company reported "None" for Defaults Upon Senior Securities, Mine Safety Disclosures, and Other Information[99] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various XBRL documents[102]