Big Lots(US:BIG)2022-03-03 17:23Financial Data and Key Metrics Changes - Q4 net sales were $1.732 billion, a 0.3% decrease compared to $1.738 billion a year ago, but up 7.8% compared to Q4 2019 [43] - Adjusted earnings per share for the quarter was $1.75, down from $2.59 last year [43][54] - Gross margin rate for the quarter was 37.3%, down approximately 210 basis points from last year's rate [44] - Total ending inventory was up 32% to last year at $1.238 billion, ahead of guidance due to higher in-transit inventory [48] Business Line Data and Key Metrics Changes - Broyhill accounted for approximately $140 million in Q4 sales, up 7% over the same quarter in 2020 [16] - Real Living sales increased over 20% versus Q4 of last year [16] - Furniture sales experienced a drop due to inventory availability, but the company is now in a better inventory position for Broyhill upholstery and mattresses [37] Market Data and Key Metrics Changes - The company opened 16 new stores and closed nine stores, ending Q4 with 1,431 stores [48] - The company expects to meet or exceed 50 net new stores in 2022, targeting margin accretive stores with 10% EBITDA returns [20] Company Strategy and Development Direction - The company aims to grow top-line sales by several billion dollars through merchandising productivity, real estate growth, and e-commerce [8] - The focus is on enhancing the customer experience through improved inventory management and seasonal offerings [15][21] - The company is committed to operational excellence and shareholder value through strategic investments and growth initiatives [7][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential despite near-term challenges, targeting sales of $8 billion to $10 billion in the coming years [31][62] - The company anticipates a flat comparable sales growth for 2022, with net new stores contributing to overall growth [95][96] - Management acknowledged the impact of supply chain disruptions and inflation on costs and margins, with plans to address shrink issues [70][82] Other Important Information - The company returned approximately $460 million to shareholders in 2021 through dividends and share repurchases [51] - The average cost of the Project Refresh program is just over $100,000 per store, aimed at enhancing the in-store experience [27] Q&A Session Summary Question: Can you discuss the improved sales momentum in February and its impact on inventory planning? - Management noted a significant recovery in February compared to January, with plans to be heavier on seasonal and furniture inventory [65][66] Question: What drove the SG&A dollar growth and the expected improvement in gross margins? - Management indicated that the higher SG&A was due to structural changes and transitory issues, with expectations to reduce shrink rates over the year [69][70] Question: Can you explain the inventory and shrink situation? - Management detailed that the spike in shrink was influenced by external factors, particularly in California, and outlined steps to mitigate these issues [76][79] Question: What is the outlook for close-out sales and availability? - Management confirmed that close-outs are becoming a larger part of the business, with good availability in certain categories [85][86] Question: How is the furniture category performing and what are the expectations moving forward? - Management reported strong sales in furniture, particularly with the Broyhill brand, and expressed confidence in recovering inventory levels [90][91]