Big Lots(US:BIG)2023-05-26 15:01Financial Data and Key Metrics Changes - Q1 net sales were $1.12 billion, an 18.3% decrease compared to $1.37 billion a year ago, driven by a comparable sales decrease of 18.2% [56][30] - Adjusted net loss for Q1 was $98.7 million, with an adjusted diluted loss per share of $3.40 [58] - Gross margin rate for Q1 was 34.9%, down 180 basis points from the previous year, primarily due to higher levels of late quarter promotions [58][31] - Total ending inventory cost was down 18.8% to $1.09 billion [42] Business Line Data and Key Metrics Changes - Seasonal comps declined 25% in Q1 due to unfavorable weather and consumer pullback on higher ticket outdoor furniture [24] - Furniture sales, particularly Broyhill upholstery, were adversely impacted by product shortages related to the closure of United Furniture Industries [30] - Food and consumables held up relatively well despite traffic challenges [2] Market Data and Key Metrics Changes - The lower-income consumer has been significantly affected by inflation, lower tax refunds, and higher interest rates, impacting overall consumer confidence [11] - The company expects continued adverse impact to comps from product shortages in furniture of around 100 basis points in Q2 [45] Company Strategy and Development Direction - The company is focusing on five key actions to drive profitable growth, including increasing the penetration of bargain items to one-third of the assortment [4][28] - Plans to enhance the assortment by procuring from over-inventoried mass retailers and distressed vendors [16] - The company aims to improve store relevance, particularly in rural and small-town markets, and enhance the omnichannel customer experience [5][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that macroeconomic headwinds will abate, leading to a boost in business [11] - The company is aggressively managing costs and has identified over $100 million in structural SG&A savings for 2023 [12] - Management anticipates a more significant improvement in the back half of the year as merchandising and marketing actions gain traction [44] Other Important Information - The board decided to suspend the dividend to enhance liquidity during challenging times [35] - The company is pursuing asset monetization, including a sale and leaseback transaction expected to generate around $240 million in net proceeds [39] Q&A Session Summary Question: Can you provide details on quarter-to-date trends and business progress as the weather changes? - Management noted that weather improvements are helping seasonal sales, but challenges remain in Q2 due to heavy promotions from the previous year [65] Question: What initiatives are in place for food and consumables? - Management highlighted that flexing assortments in food and consumables has shown high-single-digit improvements in targeted markets [88] Question: How clean is the inventory, and are there areas needing improvement? - Management indicated that while furniture inventory is not where it should be, other areas are performing well, and they are targeting promotions to clear slow-moving inventory [95][111] Question: What is the expected impact of the sale leaseback transaction on liquidity? - The transaction is expected to increase available liquidity to around $500 million, enhancing the company's financial position [117] Question: How does the company plan to attract customers from competitors' bankruptcies? - Management is leveraging marketing campaigns to attract dislocated customers from competitors, expecting to see positive results from these efforts [128]