Home Macro Pressures Drive Big Lots to Q3 Loss
December 3, 2021
Macro Pressures Drive Big Lots to Q3 Loss
Posted In: Retail Articles

By Mike Duff

Contributing Editor

Macro pressures led to a third-quarter loss for Big Lots, but the company stated that it is well-positioned for the holiday season.

The company posted a net loss of $4.3 million, or 14 cents per diluted share, for the quarter versus net income of $29.9 million, or 76 cents per diluted share, in the year-prior quarter.

Analysts polled by Yahoo Finance expected Big Lots to report a net loss of 16 cents per share and net revenues of $1.32 billion.

In a second-quarter conference call, Big Lots noted that Asian manufacturing challenges, supply chain disruption and labor cost pressures associated with hiring and retaining distribution center workers would lead to a loss in the third quarter.

Net sales were $1.34 billion, down 3.1% from the quarter a year before while comparable sales slipped 4.7% as the company lapped a 17.8% comparable sales increase in the year-prior period. On a two-year basis, comps advanced 12.3% in the quarter. Also on a two-year basis, furniture, hard home and soft home comps increased in the mid to low double digits. Seasonal two-year comps increased by 31%. Net new stores and relocations contributed 160 basis points of sales growth from the 2020 period, Big Lots indicated.

Operating loss was $4.1 million versus an operating profit of $42.5 million in the 2020 quarter.

Bruce Thorn, Big Lots president and CEO, said in a third-quarter conference call that the company had continued expanding furniture and seasonal to good effect. Food sales shrunk, a development affected by a reshuffle in sets. Inventory ended the quarter up 17.3% year over year, which Big Lots characterized as leaving the company well-positioned to meet fourth-quarter demand. Thorn pointed out that Big Lots expected strong holiday seasonal sales.

In announcing the financial results, Thorn said, “We are pleased to have delivered the quarter in line with our guidance and to have sustained double-digit two-year comps despite supply chain challenges and the expiration of stimulus benefits. Our absolute focus coming into Q4 has been to position ourselves appropriately with inventory and deliver an excellent holiday for our customers, and our fourth quarter is off to a strong start with November comps up 10% on a two-year basis, including record Thanksgiving and Black Friday week sales. Supply chain challenges will continue in the near term, but we are aggressively managing through them by partnering closely with our manufacturing and transportation partners, strategically prioritizing receipts, creating new capacity with our forward distribution centers and DC by-pass program, and ensuring we are competitive in recruiting and retaining DC associates. In addition, we have taken pricing actions and will continue to do so in response to volatile supply chain costs, while continuing to deliver great value for our customers.”

Looking at the year ahead, Torn said, “We expect to post a new record sales year in 2022, and we have ever-increasing confidence that our key growth drivers under Operation North Star – materially growing merchandise productivity, accelerating new store growth, and continuing to ramp up our e-commerce capabilities – represent a huge white space opportunity for us. In addition, we expect to see gross margin expansion in 2022 driven by promotional and pricing optimization, the deployment of new planning capabilities, and favorable mix effects. As we look towards closing out 2021 and beginning a new year, we are primed, pumped and laser-focused on being the best destination home discount store.”

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