Big Lots Reports Third Quarter Results

PRNewswire 7-Dec-2018 6:00 AM

COLUMBUS, Ohio, Dec. 7, 2018 /PRNewswire/ -- Big Lots, Inc. (NYSE:BIG) today reported a loss of $6.6 million, or $0.16 per share, for the third quarter of fiscal 2018 ended November 3, 2018. This result compares to our guidance in the range of income of $0.04 per diluted share to a loss of $0.06 per share, and to last year's third quarter adjusted income of $2.5 million, or $0.06 per diluted share (see non-GAAP table included later in this release). Comparable store sales for the third quarter of fiscal 2018 increased 3.4% compared to our guidance of +2% to +4%. Net sales for the third quarter of fiscal 2018 were $1,149.4 million, an increase of 3.6% compared to $1,109.2 million for the same period last year with the increase in comparable store sales and a favorable impact from the fiscal calendar shift partially offset by a lower store count year-over-year.

Commenting on today's release, Bruce Thorn, President and Chief Executive Officer of Big Lots, stated, "In terms of third quarter, we were pleased to achieve our second consecutive quarter of positive comps, but our bottom line results fell short of our expectations.  While we expect near-term results to be challenging this holiday season, we have a strong brand, great people, and we are working swiftly to enhance our current strategy, identify new growth opportunities, and position our business for profitable expansion well into the future."

Mr. Thorn continued, "I'm excited to have recently joined the Big Lots' family at this point in its journey and I am optimistic about the future of our Company.  In my first 60 days with the Company, I have invested time with my executive team to better understand our business and the opportunities, and I have met with many of our business leaders and associates through roadshows, town halls, and store and distribution center visits.  We have great people and I have been particularly impressed with their passion and energy as we prepare to serve Jennifer this holiday season."

Inventory ended the third quarter of fiscal 2018 at $1,074 million, compared to $1,038 million for the third quarter of fiscal 2017, with the increase in inventory primarily driven by the shift and timing of our retail calendar compared to last year, partially offset by a lower store count year over year.

We ended the third quarter of fiscal 2018 with $62 million of Cash and Cash Equivalents and $488 million of borrowings under our credit facility compared to $58 million of Cash and Cash Equivalents and $372 million of borrowings under our credit facility as of the end of the third quarter of fiscal 2017. Cash flow (cash provided by operating activities less capital expenditures) over the last 12 months has been focused on investing in strategic initiatives designed to support future growth, such as our store of the future remodel program and our California distribution center scheduled to open in fiscal 2019.

Total Cash Returned To Shareholders
As announced in a separate press release earlier today, on December 4, 2018, our Board of Directors declared a quarterly cash dividend of $0.30 per common share. This dividend payment of approximately $12 million is payable on December 28, 2018 to shareholders of record as of the close of business on December 14, 2018. Year to date, approximately $139 million has been returned to shareholders in the form of share repurchases and dividend payments.

FISCAL Q4 2018 GUIDANCE

  • Updates Q4 guidance for comparable store sales in the range of flat to an increase of 2%
  • Updates Q4 guidance for income of $2.20 to $2.40 per diluted share, compared to adjusted income of $2.57 per diluted share (non-GAAP) for the same period last year

For the fourth quarter of fiscal 2018, we estimate income will be in the range of $2.20 to $2.40 per diluted share, compared to adjusted income of $2.57 per diluted share (non-GAAP) for the fourth quarter of fiscal 2017. This guidance is based on a comparable store sales in the range of flat to an increase of 2%.

FISCAL 2018 GUIDANCE

  • Affirms guidance for fiscal 2018 comparable store sales increase of approximately 1%
  • Updates guidance for fiscal 2018 adjusted income to be in the range of $3.55 to $3.75 per diluted share (non-GAAP), compared to fiscal 2017 adjusted income of $4.45 per diluted share (non-GAAP)

Based on operating results for the first three quarters and our expectations for the fourth quarter of fiscal 2018 noted above, we now estimate fiscal 2018 adjusted income in the range of $3.55 to $3.75 per diluted share (non-GAAP). This compares to adjusted income of $4.45 per diluted share (non-GAAP) for fiscal 2017. This annual guidance is based on a comparable store sales increase of approximately 1%.



Full Year








2018 Guidance 


2017






Earnings per diluted share - adjusted basis (1)

$3.55  -  $3.75


$4.45











(1)  Non-GAAP detailed reconciliation provided in our statements below.

 

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the third quarter of fiscal 2018 and provide commentary on our outlook for fiscal 2018. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website http://www.biglots.com. If you are unable to join the webcast, an archive of the call will be available through the Investor Relations section of our website http://www.biglots.com/ after 12:00 noon today and will remain available through midnight on Friday, December 21, 2018. A replay of this call will also be available beginning today at 12:00 noon through December 21 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International) and entering Replay Passcode 3446862. All times are Eastern Time.

Headquartered in Columbus, Ohio, Big Lots, Inc. (NYSE:BIG) is a community retailer operating 1,423 BIG LOTS stores in 47 states, dedicated to friendly service, trustworthy value, and affordable solutions in every season and category – furniture, food, décor, and more. We exist to serve everyone like family, providing a better shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders. Big Lots supports the communities it serves through the Big Lots Foundation, a charitable organization focused on four areas of need: hunger, housing, healthcare, and education. For more information about the Company, visit www.biglots.com.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," "outlook" and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are and will be based upon management's then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. Although we believe the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect our business, financial condition, results of operations or liquidity.

Forward-looking statements that we make herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including, but not limited to, current economic and credit conditions, the cost of goods, our inability to successfully execute strategic initiatives, competitive pressures, economic pressures on our customers and us, the availability of brand name closeout merchandise, trade restrictions, freight costs, the risks discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, and other factors discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This release should be read in conjunction with such filings, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

Big Lots, Inc. logo. (PRNewsfoto/Big Lots, Inc.)

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)










NOVEMBER 3


OCTOBER 28




2018


2017




(Unaudited)


(Unaudited)








ASSETS











Current assets:






Cash and cash equivalents


$61,938


$58,012


Inventories


1,073,885


1,038,156


Other current assets


141,424


118,822


   Total current assets


1,277,247


1,214,990







Property and equipment - net


782,771


537,563







Deferred income taxes


22,923


47,027

Other assets


50,075


46,529




$2,133,016


$1,846,109














LIABILITIES AND SHAREHOLDERS' EQUITY      











Current liabilities:






Accounts payable


$479,634


$493,097


Property, payroll and other taxes


85,775


87,007


Accrued operating expenses


112,458


77,683


Insurance reserves


38,070


41,561


Accrued salaries and wages


28,342


31,563


Income taxes payable


1,295


865


   Total current liabilities


745,574


731,776







Long-term obligations under bank credit facility


488,000


371,900







Deferred rent


61,054


56,622

Insurance reserves


55,769


56,948

Unrecognized tax benefits


12,738


15,732

Synthetic lease obligation


131,644


-

Other liabilities


45,505


47,467







Shareholders' equity


592,732


565,664




$2,133,016


$1,846,109

 

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)












13 WEEKS ENDED


13 WEEKS ENDED




NOVEMBER 3, 2018


OCTOBER 28, 2017





%



%




(Unaudited)


(Unaudited)

















Net sales


$1,149,402

100.0


$1,109,184

100.0










Gross margin


459,174

39.9


443,626

40.0










Selling and administrative expenses 


436,826

38.0


408,314

36.8










Depreciation expense


31,911

2.8


29,508

2.7









Operating (loss) profit


(9,563)

(0.8)


5,804

0.5










Interest expense


(3,138)

(0.3)


(2,077)

(0.2)










Other income (expense)


59

0.0


405

0.0









(Loss) income before income taxes


(12,642)

(1.1)


4,132

0.4










Income tax benefit


(6,086)

(0.5)


(240)

(0.0)









Net (loss) income


($6,556)

(0.6)


$4,372

0.4

















Earnings (loss) per common share
















Basic


($0.16)



$0.10











Diluted


($0.16)



$0.10


















Weighted average common shares outstanding
















Basic


40,021



41,967











Dilutive effect of share-based awards


-



557











Diluted


40,021



42,524










Cash dividends declared per common share


$0.30



$0.25


 

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)












39 WEEKS ENDED


39 WEEKS ENDED




NOVEMBER 3, 2018


OCTOBER 28, 2017





%



%




(Unaudited)


(Unaudited)

















Net sales


$3,639,554

100.0


$3,623,751

100.0










Gross margin


1,462,551

40.2


1,460,401

40.3










Selling and administrative expenses 


1,301,523

35.8


1,239,440

34.2










Depreciation expense


90,936

2.5


87,489

2.4









Operating profit


70,092

1.9


133,472

3.7










Interest expense


(7,121)

(0.2)


(4,705)

(0.1)










Other income (expense)


716

0.0


323

0.0









Income before income taxes


63,687

1.7


129,090

3.6










Income tax expense


14,840

0.4


44,086

1.2









Net income


$48,847

1.3


$85,004

2.3

















Earnings per common share
















Basic


$1.19



$1.97











Diluted


$1.19



$1.95


















Weighted average common shares outstanding
















Basic


41,065



43,155











Dilutive effect of share-based awards


138



409











Diluted


41,203



43,564










Cash dividends declared per common share


$0.90



$0.75


 

 

BIG LOTS, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)












13 WEEKS ENDED


13 WEEKS ENDED






NOVEMBER 3, 2018


OCTOBER 28, 2017






 (Unaudited) 


 (Unaudited) 












  Net cash used in operating activities 


($70,140)


($70,890)












  Net cash used in investing activities


(109,607)


(41,602)












  Net cash provided by financing activities


183,228


114,495











Increase in cash and cash equivalents


3,481


2,003




Cash and cash equivalents:








  Beginning of period


58,457


56,009




  End of period


$61,938


$58,012



 

 

BIG LOTS, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)




















39 WEEKS ENDED


39 WEEKS ENDED






NOVEMBER 3, 2018


OCTOBER 28, 2017






 (Unaudited) 


 (Unaudited) 












  Net cash provided by operating activities 


$40,420


$29,072












  Net cash used in investing activities


(281,033)


(93,293)












  Net cash provided by financing activities


251,375


71,069











Increase in cash and cash equivalents


10,762


6,848




Cash and cash equivalents:








  Beginning of period


51,176


51,164




  End of period


$61,938


$58,012



 

BIG LOTS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

The following tables reconcile: selling and administrative expenses, selling and administrative expense rate, operating profit, operating profit rate, income tax expense (benefit), effective income tax rate, net income, and diluted earnings per share for the year-to-date 2018, the third quarter of 2017, the year-to-date 2017, the fourth quarter of 2017 and the full year 2017 (GAAP financial measures) to adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense (benefit), adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share (non-GAAP financial measures).

 Year-to-date 2018 - Thirty-nine weeks ended November 3, 2018 










 As Reported 


Adjustment to
exclude CEO
retirement costs


Adjustment to
exclude
shareholder
litigation matter


As Adjusted
(non-GAAP)

 Selling and administrative expenses 

$            1,301,523


$                      (7,018)


$                      (3,500)


$            1,291,005

 Selling and administrative expense rate 

35.8%


(0.2%)


(0.1%)


35.5%

 Operating profit 

70,092


7,018


3,500


80,610

 Operating profit rate 

1.9%


0.2%


0.1%


2.2%

 Income tax expense 

14,840


895


879


16,614

 Effective income tax rate 

23.3%


(0.6%)


(0.3%)


22.4%

 Net income 

48,847


6,123


2,621


57,591

 Diluted earnings per share  

$                     1.19


$                         0.15


$                         0.06


$                     1.40

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") (1) the costs associated with the retirement of our former CEO of $7,018 ($6,123, net of tax); and (2) a pretax charge related to the settlement in principle of shareholder litigation matters of $3,500 ($2,621, net of tax).

Third quarter of 2017 - Thirteen weeks ended October 28, 2017








 As Reported


Adjustment to
exclude gain on
insurance
recoveries


As Adjusted
(non-GAAP)

 Selling and administrative expenses

$              408,314


$                      3,000


$              411,314

 Selling and administrative expense rate

36.8%


0.3%


37.1%

 Operating profit

5,804


(3,000)


2,804

 Operating profit rate

0.5%


(0.3%)


0.3%

 Income tax benefit

(240)


(1,149)


(1,389)

 Effective income tax rate

(5.8%)


(116.9%)


(122.7%)

 Net income

4,372


(1,851)


2,521

 Diluted earnings per share 

$                    0.10


$                       (0.04)


$                    0.06

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax benefit, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP a pretax gain on insurance recoveries associated with merchandise-related legal matters of $3,000 ($1,851, net of tax).

 Year-to-date 2017 - Thirty-nine weeks ended October 28, 2017 








As Reported 


Adjustment to
exclude gain on
insurance
recoveries


As Adjusted
(non-GAAP)

 Selling and administrative expenses 

$           1,239,440


$                      3,000


$           1,242,440

 Selling and administrative expense rate 

34.2%


0.1%


34.3%

 Operating profit 

133,472


(3,000)


130,472

 Operating profit rate 

3.7%


(0.1%)


3.6%

 Income tax expense 

44,086


(1,149)


42,937

 Effective income tax rate 

34.2%


(0.1%)


34.1%

 Net income 

85,004


(1,851)


83,153

 Diluted earnings per share  

$                    1.95


$                       (0.04)


$                    1.91

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP a pretax gain on insurance recoveries associated with merchandise-related legal matters of $3,000 ($1,851, net of tax).

 Fourth quarter of 2017 - Fourteen weeks ended February 3, 2018 








 As Reported 


 Impact on deferred
taxes resulting
from U.S. tax
reform 


 As Adjusted
(non-GAAP) 

 Selling and administrative expenses 

$              484,556


$                             -


$             484,556

 Selling and administrative expense rate 

29.5%


-


29.5%

 Operating profit 

167,881


-


167,881

 Operating profit rate 

10.2%


-


10.2%

 Income tax expense 

61,436


(4,517)


56,919

 Effective income tax rate 

37.0%


(2.7%)


34.2%

 Net income 

104,828


4,517


109,345

 Diluted earnings per share  

$                    2.46


$                         0.11


$                    2.57

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP the impact to deferred taxes resulting from the U.S. Tax Cuts and Jobs Act of 2017 of $4,517.

 Full Year 2017 - Fifty-three weeks ended February 3, 2018 










 As Reported 


 Adjustment to
exclude gain on
insurance
recoveries 


 Impact on deferred
taxes resulting
from U.S. tax
reform 


 As Adjusted
(non-GAAP) 

 Selling and administrative expenses 

$           1,723,996


$                      3,000


$                               -


$           1,726,996

 Selling and administrative expense rate 

32.7%


0.1%


-


32.8%

 Operating profit 

301,353


(3,000)


-


298,353

 Operating profit rate 

5.7%


(0.1%)


-


5.7%

 Income tax expense 

105,522


(1,149)


(4,517)


99,856

 Effective income tax rate 

35.7%


(0.0%)


(1.5%)


34.2%

 Net income 

189,832


(1,851)


4,517


192,498

 Diluted earnings per share  

$                    4.38


$                       (0.04)


$                         0.10


$                    4.45

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP (1) a pretax gain on insurance recoveries associated with merchandise-related legal matters of $3,000 ($1,851, net of tax); and (2) the impact to deferred taxes resulting from the U.S. Tax Cuts and Jobs Act of 2017 of $4,517.

Our management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative and more relevant method for measuring our operating performance, excluding special items included in the most directly comparable GAAP financial measures, that management believes is more indicative of our on-going operating results and financial condition. Our management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance.

 

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SOURCE Big Lots, Inc.

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