Big Lots(US:BIG)2019-05-31 18:45Financial Data and Key Metrics Changes - Total sales for Q1 2019 were $1.296 billion, an increase of 2.2% compared to $1.268 billion in the previous year [30] - Comparable store sales increased by 1.5%, aligning with guidance for low single-digit growth [30] - Adjusted EPS for Q1 was $0.92, exceeding the guidance range of $0.65 to $0.75 [32] - Adjusted gross margin rate was 40.5%, up 10 basis points from the previous year [33] - Adjusted income for the quarter was $37 million, compared to $40 million in the same period last year [32] Business Line Data and Key Metrics Changes - Furniture sales increased by mid-single digits, driven by case goods, upholstery, and mattresses [17] - Soft Home also saw mid-single digit growth, marking 21 consecutive quarters of such performance [21] - Seasonal products experienced mid-single digit growth, with sales accelerating in March and April [22] - Consumables grew by low single digits, while food sales declined due to intense competition [24][25] - Hard Home and Electronics, Toys & Accessories categories saw planned declines as the company shifted focus to more profitable categories [26] Market Data and Key Metrics Changes - The company opened nine new stores and closed six, resulting in a total of 1,404 stores [37] - Inventory levels increased to $927 million, up from $850 million last year, attributed to tariffs and strategic inventory commitments [36] - The e-commerce business had its best quarter since launching, contributing to overall sales growth [15] Company Strategy and Development Direction - The company is focused on the "Store of the Future" initiative, remodeling over 200 stores and opening approximately 50 new stores in this format [54] - The "Operation Northstar" project aims to reposition the business for long-term success through various growth work streams [51] - The company is transitioning its in-store mattress assortments to Sealy, aiming to enhance product quality and customer perception [19][20] - The loyalty program saw an increase to 17.7 million active members, a 16% year-over-year growth [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the delayed income tax refunds negatively impacted Q1 sales but saw a rebound in March and April [89] - The company expects adjusted income for Q2 to be in the range of $0.35 to $0.45 per diluted share, reflecting a cautious outlook due to weather impacts [43] - Management is optimistic about the performance of new stores and the ongoing success of the Store of the Future initiative [96] Other Important Information - The company plans to increase capital expenditures to $77 million for strategic investments, including the Store of the Future and a new distribution center [38] - The board declared a quarterly cash dividend of $0.30 per share, payable on June 28, 2019 [42] Q&A Session Summary Question: Can you provide more color on expenses and the $100 million cost target? - Management expressed satisfaction with Q1 expense performance, noting good control over store operations and other controllable expenses [62][64] Question: What prompted the decision to change the mattress category to Sealy? - The company highlighted the strong brand recognition of Sealy and its innovative products as key reasons for the transition [68][69] Question: How are merchandise categories being evaluated for potential shifts? - Management confirmed a focus on Furniture, Soft Home, and Seasonal categories while also addressing the importance of food and consumables [70][72] Question: What impact do tariffs have on pricing and consumer reaction? - The company acknowledged that tariffs have influenced pricing strategies, but efforts are being made to manage costs and maintain value [74][102] Question: Can you provide an update on the buy online, pickup in store rollout? - The pilot for BOPIS has launched successfully, with expectations for a full rollout by the end of summer [86][87]