Big Lots' stock turns higher as 'extreme bargains' set stage for sales to bottom

By Tomi Kilgore

Upbeat outlook for margins and same-store sales offsets a wider-than-expected quarterly loss

Shares of Big Lots Inc. rallied Thursday to reverse an earlier sharp loss after the discount home-essentials retailer provided an upbeat gross-margin outlook and said same-store sales may bring an end to the long quarterly streak of declines.

Chief Executive Bruce Thorn said on the post-earnings call with analysts that he expects to "significantly grow" the percentage of sales marked as "bargains" to 75%, as the assortment of "extreme bargains" has expanded.

"These extreme bargains create a more exciting treasure-hunt experience, which will keep our customers coming back to our stores and help drive comparable-sales growth," Thorn said, according to a FactSet transcript.

The stock (BIG) shot up 8% in morning trading, after being down as much as 10.5% at the intraday low of $4.50, hit moments after the opening bell.

For the fiscal fourth quarter that ended Feb. 3, comparable-store sales, or sales at stores open at least a year, fell 8.6% from a year ago, compared with the FactSet consensus estimate of an 8.5% decline.

That marked the 11th straight quarter that same-store sales have fallen. Current FactSet consensus estimates also call for declines in each quarter of the current fiscal year.

Net losses for the latest quarter widened to $30.7 million, or $1.05 a share, from $12.5 million, or 43 cents a share, in the same period a year ago. Excluding nonrecurring items, such as distribution-center closing costs, the adjusted per-share loss was 28 cents, compared with the FactSet loss consensus of 23 cents.

Sales fell 7.2% to $1.43 billion, in line with the FactSet consensus and with guidance provided a month ago.

Gross margin improved to 38% from 36.3%, in line with guidance.

For the first quarter, the company expects gross margin to improve "significantly," in the range of 2 to 2.5 percentage points, because of fewer price cuts, lower freight costs and other cost-cutting actions.

"We expect quarterly year-over-year gross margin improvements to continue in 2024 and see a path to positive comparable sales as the year progresses," Thorn said.

The stock has tumbled 30.3% year to date, while the S&P 500 has gained 7.8%.

-Tomi Kilgore

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03-07-24 1006ET

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