With discretionary retail taking the brunt of the economic damage this year, Big Lots (NYSE:BIG) proved it’s not over until it’s over. BIG stock jumped Tuesday morning following a better-than-expected performance for the underlying company’s second-quarter earnings report.
For the three months to July 30, Big Lots posted a net loss of $84.2 million or $2.91 a share. To be sure, these stats slipped below their respective year-ago results of $37.7 million and $1.09 a share. Excluding non-recurring items, Big Lots adjusted loss was $2.28 a share. However, this figure came in narrower than the Wall Street consensus target of a $2.47 loss per share.
On the top line, the retailer generated revenue of $1.35 billion. This stat too fell below the year-ago comparison, which was $1.46 billion. Still, Big Lots managed to inch past analysts’ consensus target of $1.34 billion. Further, same-store sales declined by 9.2%, while analysts anticipated a decline of 9.8%.
With the erosion of purchasing power imposing a harsh reality on American households, Big Lots delivered a pleasant surprise. The latest Q2 report inked the first time in four quarters that the company exceeded consensus EPS estimates. Therefore, investors enthusiastically bid up BIG stock.
Per MarketWatch, management expects “same-store sales to be down in the low double-digit range.” It also anticipates “net net stores to add about 140 basis points of growth compared with 2021.” As well, Big Lots’ press release stated that it “expects continued significant promotional activity in the third quarter, resulting in a quarter gross margin rate into the mid-30s, and that SG&A dollars will grow low single-digits to 2021.”
BIG Stock Fights Back Against a Tough Environment
Naturally, management celebrated the Q2 results and the implications they had for BIG stock. “I’d like to thank our associates for rising to the challenge in Q2, by continuing to provide an elevated customer shopping experience and again achieving a top-tier Net Promoter Score above 80%,” said Bruce Thorn, president and CEO of Big Lots.
Our outstanding team helped us to deliver results in line with the financial guidance we provided coming into the quarter. We managed costs tightly, made great progress on repositioning our assortment towards better bargains/closeouts and lower price points, and took important steps to enhance our balance sheet and secure our liquidity. We also brought inventories down materially versus Q1, putting us on track to right-size our inventory position by Q4.
While the above measures theoretically better enables Big Lots to offer greater value to its customers, it remains to be seen whether investors will accept potential challenges to margins. Nevertheless, Wall Street has already demonstrated that it will adjust expectations to meet the current retail paradigm. For instance, last week, Macy’s (NYSE:M) stock jumped 6% despite the company cutting its full-year outlook. Therefore, circumstances appear favorable for BIG stock.
Of course, patience runs thin in the market these days. Over the trailing five days, M shares have slipped around 5.5%. Presumably, then, Big Lots must make conspicuous progress toward its goals.
Why It Matters
Recently, MarketWatch reported that consumer confidence increased in August, the first positive move in four months. Contributing to the optimism were falling gasoline prices, indicating some measure of economic stabilization.
While a positive development for BIG stock fundamentally, management must continue marching forward. As this year has already proven several times, nothing can be taken for granted.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
