Big Lots(US:BIG)2022-05-27 14:47Financial Data and Key Metrics Changes - Q1 net sales were $1.375 billion, a 15.4% decrease compared to $1.626 billion a year ago, driven by a comparable sales decrease of 17% [28] - The first quarter net loss was $11.1 million compared to a net income of $94.6 million in Q1 of 2021, with a loss per share of $0.39 versus diluted EPS of $2.62 last year [28] - The gross margin rate for Q1 was 36.7%, down approximately 350 basis points from last year's rate, significantly underperforming guidance [28][29] - Total ending inventory cost was up 48.5% year-over-year at $1.339 billion, primarily due to inflationary increases and mix effects [31] Business Line Data and Key Metrics Changes - Seasonal, Furniture, and Soft Home categories drove 90% of the sales miss for the quarter, with significant softness in April [12][13] - Seasonal sales performed well in February and March, up 40% on a three-year comp basis, but April saw a decline [12] - The e-commerce business accounted for around 7% of total business, with same-day delivery growing 20% [22] Market Data and Key Metrics Changes - Consumer confidence is low, and real disposable income is declining, impacting discretionary purchases [6][13] - The Midwest region showed particular softness relative to plan, while the Southeast performed better [13] Company Strategy and Development Direction - The company is focused on correcting inventory levels and adjusting opening price points to drive traffic [19][21] - Plans to reduce capital expenditures from $230 million to around $175 million for the year, with a reduction in net store openings from 50-plus to 30-plus [18][37] - The company aims to leverage closeout opportunities and improve gross margin rates by Q4 [17][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging economic environment but remains confident in long-term growth opportunities [25][39] - The company expects to see significant opportunities in the second half of the year as corrective actions take effect [35][39] - Management emphasizes the importance of supporting lower-income customers during inflationary times [62] Other Important Information - The company declared a quarterly cash dividend of $0.30 per common share, payable on June 24, 2022 [33] - The company has incurred significant detention and demurrage charges, which are expected to decrease in the back half of the year [36] Q&A Session Summary Question: Confidence in returning to normal inventory levels by the end of Q2 - Management is aggressively focused on achieving desired inventory levels by the end of Q2, expecting a significant reduction in year-over-year increases [41][42] Question: Improvement in three-year comp in May - Management believes there has been a slight pickup in underlying trends, but promotional activity has also played a significant role [44] Question: Actions to lower opening price points - Management is working on reducing rich inventory and leveraging closeouts to improve opening price points [48][49] Question: Confidence in returning to last year's gross margin levels - Management cites several levers, including reduced detention and demurrage costs, improved inventory management, and a less promotional environment in the second half of the year [51][54] Question: Profitability variance among stores - A relatively small number of stores are unprofitable, with profitability varying by geography and other factors [75] Question: Increase in usage of Big Lots credit card and Easy Leasing - The increase is attributed to inflationary pressures, making these financing options more appealing to consumers [76]