Big Lots sees gains across categories

Big Lots said its comparable stores sales for the fourth quarter of fiscal 2020 have increased 7.5% to date.

That reflects double-digit comps in all merchandise categories other than seasonal, which is down by a mid-teen percentage due to low levels of Christmas inventory in December, and food, which is up low single digits. E-commerce demand quarter-to-date is up approximately 135%. The company has seen an acceleration in trends in January and, for the quarter as a whole, expects comps to increase slightly from the quarter-to-date rate.

Based on this sales outlook, the company estimates it will generate diluted EPS in the range of $2.40 to $2.50 for the fourth quarter of fiscal 2020, versus $2.39 of diluted EPS reported for the comparable quarter last year. This guidance continues to reflect an expectation of gross margin rate approximately flat to last year, with benefits from lower markdowns offset by a significant adverse freight impact as a result of transportation capacity constraints and DC processing backlogs caused by restoration of inventory levels and COVID-related labor shortages.

The guidance also continues to reflect operating expenses up by approximately the same dollar amount as the third quarter of fiscal 2020, including additional year-over-year expense from the company's sale and leaseback of its distribution centers, higher bonus and stock compensation expense, and additional expenses related to COVID-19.

The guidance further incorporates the repurchase of approximately 1.2 million shares on a quarter-to-date basis at an average cost of $45.41 per share for an aggregate amount of approximately $55.7 million. The company has approximately $344 million remaining available under a $500 million share repurchase authorization approved by its Board of Directors on Aug. 27, 2020.

Commenting on the announcement, Bruce Thorn, president and CEO of Big Lots said, "I am pleased with our fourth quarter performance to date and our outlook for the balance of the period. This has been a hard-fought quarter that posed some challenges including softer-than-planned traffic in December, low levels of Christmas seasonal inventory, and extraordinary supply chain circumstances created by COVID-19. Despite these headwinds, our underlying performance has remained strong and we are pleased with the improvement in sales trends we are seeing in January."

As previously announced, the company will be participating in the 2021 ICR Conference, which will be a virtual event this year. In addition to Thorn, Jonathan Ramsden, EVP, chief financial and administrative officer, and Jack Pestello, EVP, chief merchandising officer, are scheduled to participate in a fireside chat on Jan. 13.