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BIG LOTS INC (BIG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 (reported March 7, 2024) showed sequential operational progress but remained loss-making: net sales $1.432B, comparable sales -8.6%, GAAP EPS -$1.05, adjusted EPS -$0.28; gross margin rate improved to 38.0% year over year .
  • Versus consensus, revenue was modestly above external estimates, while EPS missed: Actual EPS (-$0.28) vs consensus (-$0.23); actual revenue ($1.432B) vs consensus ($1.426B); S&P Global consensus was unavailable, so third-party benchmarks are shown; miss/beat magnitude small and unlikely to re-rate the stock by themselves .
  • Management reiterated turnaround pillars (owning bargains, value communication, productivity) and targeted bargain penetration of ~75% of sales in 2024, following ~60% in Q4; net liquidity was $254M at quarter-end, with inventory down 17% YoY to $953.3M .
  • Near-term catalyst: expectation of significant YoY gross margin improvement in Q1 2024 (+200–250 bps YoY) and sequential comp improvement; however, liquidity and debt levels remain key watch items (long-term debt ~$406.3M) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin rate expanded to 38.0% (+170 bps YoY), aided by normalized markdowns and lower freight costs; management guided further expansion in Q1 2024 (+200–250 bps YoY) .
  • Bargain penetration reached nearly 60% in Q4; “expect to grow to 75% penetration in 2024,” reinforcing merchandising strategy and value proposition .
  • CEO tone: “We did what we said we would do… finished the year in a much better place than where we started,” highlighting sequential improvement in comps and gross margin and execution on five key actions (own bargains; communicate value; store relevance; omnichannel; productivity) .

What Went Wrong

  • Comparable sales declined 8.6% and net sales fell 7.2% YoY to $1.432B; adjusted EPS loss persisted at -$0.28, indicating the turnaround is still in early innings .
  • Liquidity concerns remain: net liquidity $254M; long-term debt up to ~$406.3M; macro/winter weather headwinds cited, pressuring traffic and sales .
  • Expense leverage still challenging: adjusted SG&A of ~$509.9M grew as a rate to 35.6% of sales; despite structural savings and Project Springboard, scale deleverage constrained profitability .

Financial Results

MetricQ2 2024 (reported Aug 29, 2023)Q3 2024 (reported Nov 30, 2023)Q4 2024 (reported Mar 7, 2024)YoY vs Q4 2023Vs External Estimates
Revenue ($USD Billions)N/A$1.027 $1.432 -7.2% YoY Beat by +$0.006B vs $1.426B
Comparable Sales (%)-14.6% -13.2% -8.6% N/AN/A
Gross Margin Rate (%)N/AN/A38.0% +170 bps YoY (from 32.6%) N/A
GAAP EPS ($)N/A$0.16 -$1.05 N/AN/A
Adjusted EPS ($)-$3.24 -$4.38 -$0.28 Flat vs -$0.28 LY Miss by -$0.05 vs -$0.23
Inventory ($USD Billions)N/AN/A$0.953 -17.0% YoY N/A
Net Liquidity ($USD Billions)N/AN/A$0.254 N/AN/A
Long-term Debt ($USD Billions)N/AN/A$0.406 +$0.105 YoY N/A

KPIs and Operating Metrics:

  • Bargain Penetration (% of Sales): ~60% in Q4; targeted ~75% in 2024 .
  • Adjusted Operating Profit ($): ~$1M in Q4, first positive adjusted operating profit since Q4 2021 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Q4 CompsQ4 2024High-single-digit decline expected (from Q3 slides) -8.6% actual Achieved (in range)
Q4 Gross Margin RateQ4 2024~38% (improvement vs LY) 38.0% actual Achieved
Q4 Adjusted Operating ResultQ4 2024“Ahead of last year” expected Positive adjusted operating profit (~$1M) Raised vs LY outcome
Q1 CompsQ1 2024Not previously providedMid-single-digit negative; sequential improvement vs Q4 New
Q1 Gross Margin RateQ1 2024Not previously provided+200–250 bps YoY New
Q1 Adjusted SG&AQ1 2024Not previously providedLow-single-digit % decline YoY New
Interest ExpenseQ1 2024Not previously provided~$13M New
Store ActivityFY 2024Prudent approach to openings4 openings in Q3; new commitments on hold Maintained discipline

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Bargains & Value CommunicationTarget >33% bargains penetration by YE 2023; focus on extreme bargains and clearer value signals Reinforced five actions; comp sequential improvement expected; bargain-driven merchandising ~60% bargains in Q4; plan to reach ~75% in 2024 Strengthening
Gross MarginImprovement vs prior year into high-30s Significant improvement expected Q4; normalized markdowns, lower freight 38.0% actual; further +200–250 bps YoY in Q1 guided Improving
Traffic/CompsDouble-digit negative comps; sequential improvement expected Comps expected to sequentially improve into Q4 Traffic primary driver of comps; anticipate continued sequential improvement through 2024 Improving
Liquidity & FinancingAsset monetization ($294–306M); prudently managing borrowings Sale-leaseback completed; ample liquidity messaging Net liquidity $254M; evaluating additional financing options Cautious/Focused
Project Springboard$200M+ bottom-line opportunity; benefits by end of 2024 On track; high proportion of benefits in 2024 On track; cumulative ~$175M by end of 2024 Executing

Management Commentary

  • “We did what we said we would do… despite a challenging macroeconomic environment and well documented weather challenges in January, we finished the year in a much better place than where we started.”
  • “Our five key actions are gaining momentum… we are excited to return to comp sales growth as 2024 progresses, driven by continued progress on these key actions, and to significantly improve our gross margin in every quarter versus last year.”
  • CFO on traffic: “Traffic was the primary driver of our comp trend evolution… we do anticipate continued sequential improvement in traffic trends… driven by extreme bargains [and] unmistakable values.”

Q&A Highlights

  • Traffic and comps: Management expects sequential traffic improvement aligned with comp recovery in 2024, led by extreme bargains and value messaging .
  • Expense outlook: Q1 interest expense guided to ~$13M; depreciation ~$34M; CapEx 2024 “in line with or somewhat below” 2023; SG&A expected to decline low-single-digit % YoY in Q1 .
  • Store opening discipline: Four 2024 openings clustered in Q3; broader commitments on hold until the business improves .
  • Macro sensitivity: Management cited election year uncertainties, rate fluctuations, and potential supply chain disruptions (e.g., Red Sea) but emphasized controllable levers (merchandising, cost) .

Estimates Context

  • S&P Global consensus estimates were unavailable for BIG in this period; comparison uses third-party published consensus.
  • EPS: Actual -$0.28 vs consensus -$0.23; miss of -$0.05. Revenue: Actual $1.432B vs consensus ~$1.426B; modest beat (+$6.24M) .
  • Given margin improvement and bargain penetration, sell-side may lift gross margin assumptions but likely maintain cautious sales/traffic recovery curves; liquidity and leverage views may temper estimate increases .

Key Takeaways for Investors

  • Gross margin is the bright spot: 38.0% in Q4 with Q1 guided +200–250 bps YoY, reflecting normalized markdowns, freight savings, and early Project Springboard benefits—supportive of near-term spread improvement even if comps remain negative .
  • Merchandising pivot is gaining traction: ~60% bargain penetration in Q4 with a pathway to ~75% in 2024; this strategy underpins traffic recovery and value communication .
  • Watch liquidity and leverage: net liquidity $254M and long-term debt ~$406M; ongoing evaluation of financing options indicates continued balance sheet management remains critical to the turnaround .
  • Near-term trading setup: modest revenue beat and small EPS miss suggest limited estimate revisions; stock moves will likely track confidence in Q1 margin expansion and evidence of sequential comp improvement .
  • Medium-term thesis: Execution on Project Springboard (~$200M+ bottom-line opportunity; cumulative ~$175M by end of 2024) and sustained bargain strategy are key to re-establishing profitability; store opening discipline reflects focus on cash and returns .
  • Risk factors: macro sensitivity (lower-income consumer, weather), traffic recovery uncertainty, and financing needs could constrain valuation despite margin trajectory .
  • Monitoring items: Q1 gross margin progression, SG&A control, inventory turns, and any financing actions; track bargain penetration and traffic indicators monthly where available .

References and additional materials:

  • Q4 press release and preliminary commentary: Feb 12, 2024 pre-announcement; Mar 7, 2024 results .
  • Q4 earnings call transcript: Seeking Alpha; MarketScreener .
  • Prior quarters: Q3 and Q2 investor slides/8-K summaries .
  • External coverage and detail (gross margin, debt, inventory): Yahoo Finance; RetailDive .