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BIG LOTS INC (BIG)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 (ended October 28, 2023) delivered net sales of $1.03B, GAAP EPS of $0.16 and adjusted EPS loss of $4.38; gross margin rate improved to 36.4% (+240 bps YoY) as management executed cost and merchandising actions .
  • Comparable sales fell 13.2% YoY, in line with guidance; adjusted SG&A trended better than expected, aided by Project Springboard savings and sale-leaseback initiatives .
  • Guidance: reiterated Q4 negative high-single-digit comps and ~38% gross margin rate; management expects Q4 adjusted operating result ahead of last year—the first YoY improvement since Q1 2021—driven by “five key actions” and bargain penetration .
  • Stock reaction catalyst: improved margin trajectory and a path to sequential operating improvement into Q4, with marketing (“Black Friday is Every Friday”) supporting traffic and value perception .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin rate expanded to 36.4% on lower markdowns, improved inventory alignment and freight tailwinds; management highlighted strong progress on “own bargains” and productivity actions .
    • Adjusted expenses ahead of guidance; Project Springboard savings and sale-leaseback liquidity actions bolstered balance sheet flexibility .
    • CEO: “We are now on track to deliver an adjusted Q4 operating result ahead of last year… and expect quarterly year-over-year improvements to continue through 2024” .

  • What Went Wrong

    • Comps down 13.2% (continued pressure on lower-income customer and high-ticket discretionary); topline remained below prior year notwithstanding margin progress .
    • Adjusted EPS loss of $4.38 reflects ongoing demand headwinds despite cost actions and mix shift; category softness persisted in furniture and hard home .
    • Sequential improvement needed in Q4 and beyond; management acknowledged macro uncertainty and focused on “controlling the controllables” to drive traffic and price perception .

Financial Results

MetricQ3 FY2023 (Prior Year)Q2 FY2024 (Prior Quarter)Q3 FY2024 (Current)
Net Sales ($USD Billions)$1.204 $1.047 $1.027
GAAP EPS ($)($3.56) ($8.04) $0.16
Adjusted EPS ($)($2.99) ($3.24) ($4.38)
Gross Margin Rate (%)32.6 33.0 36.4
Comparable Sales (%)n/a (prior year reference)(14.6) (13.2)

KPIs and Mix

KPI / MixQ3 FY2024
Inventory at period-end ($USD Billions)$1.177
Category Mix (sales contribution)Furniture 27%; Food 16%; Soft Home 15%; Consumables 14%; Seasonal 11%; “The Lot”/Apparel/Electronics 10%; Hard Home 7

Notes:

  • Q3 FY2024 corresponds to Big Lots’ fiscal third quarter ended October 28, 2023, as reported November 30, 2023; Q2 FY2024 ended August 2023. All figures sourced from company releases and materials cited above .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable SalesQ4 FY2024n/aNegative high-single-digit rangeMaintained directional downtrend
Gross Margin RateQ4 FY2024n/a~38%Raised vs prior-year level; explicit target reiterated
Adjusted Operating ResultQ4 FY2024n/aExpected ahead of last yearRaised (positive inflection expected)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY2024, Q2 FY2024)Current Period (Q3 FY2024)Trend
Bargain/closeout sourcing (“own bargains”)Raised targets; aiming 75% bargains and 50% extreme bargains penetration by year-end Progress credited for margin gains; marketing amplified value perception Improving execution
Project Springboard (cost/productivity)Raised cumulative 2024 savings target to $185M; liquidity actions (FILO term loan) Adjusted expenses ahead of guidance; sale-leaseback boosted flexibility Saving cadence sustained
Consumer/macro headwindsCore lower-income customer challenged; comps down mid/high-single digits in Q1/Q2 Comps down 13.2% in Q3; value-focused promotions to offset Persistent pressure
Category performanceQ1: discretionary softness; Q2: sequential improvement in furniture/soft home comps Pet standout; consumables reset aided personal care; furniture still soft Mixed
Marketing/Omnichannel“Black Friday is Every Friday” and similar campaigns in Q3/Q4 Emphasis on “Bargains to Brag About”; driving traffic and value perception Step-up in messaging

Management Commentary

  • CEO Bruce Thorn (press release): “We are now on track to deliver an adjusted Q4 operating result ahead of last year… and we expect quarterly year-over-year improvements to continue through 2024” .
  • CEO (call): momentum from five key actions—own bargains, communicate unmistakable value, increase store relevance, win with omnichannel, drive productivity—supporting margin and expense progress .
  • CFO commentary emphasized adjusted SG&A reductions and sale-leaseback impact on rent/depreciation, with liquidity stronger post transactions .

Q&A Highlights

  • Analysts probed furniture and consumables trajectory; management cited reset assortments and stronger price/value communication to rebuild traffic and conversion .
  • Guidance clarifications: Q4 adjusted operating result expected ahead of last year despite negative comps, anchored by ~38% gross margin and cost controls .
  • Tone vs prior quarters: more confident on margin trajectory and cost actions; still cautious on demand/macro, with a focus on “controlling the controllables” .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q3 FY2024 were unavailable due to a CIQ mapping issue; as a result, we cannot present SPGI consensus comparisons for Q3 FY2024 at this time. Values retrieved from S&P Global were unavailable due to mapping constraints.

Key Takeaways for Investors

  • Margin trajectory improving: 36.4% gross margin in Q3 and ~38% guided for Q4, driven by bargain penetration, pricing/promo discipline, and freight tailwinds—supporting a near-term operating inflection despite weak comps .
  • Expense discipline and Project Springboard savings are tangible, with adjusted SG&A ahead of guidance; sale-leaseback transactions increased flexibility to navigate macro pressure .
  • Near-term trading: narrative hinges on Q4 margin delivery and adjusted operating improvement; any upside on comps or category stabilization (consumables/pet) could catalyze sentiment .
  • Medium-term thesis: turnaround requires sustained execution of five key actions and deeper closeout sourcing; watch for continued inventory optimization, store relevance initiatives, and marketing efficacy to support traffic and mix .
  • Risk factors: lower-income customer sensitivity, discretionary category softness (furniture/hard home), and lingering macro uncertainty could weigh on comps despite margin gains .
  • Liquidity actions (including sale-leaseback) and cost resets help bridge to improved operating results; the Q4 milestone (ahead of last year) is pivotal for validating the margin and productivity narrative .