Big Lots : Reports Q4 Sales And Income Above Guidance

COLUMBUS, Ohio, March 8, 2019 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported income of $108.0 million, or $2.68 per diluted share, for the fourth quarter of fiscal 2018 ended February 2, 2019. This result exceeds our previously communicated guidance of income of $2.20 to $2.40 per diluted share, and compares favorably to adjusted income of $109.3 million, or $2.57 per diluted share (a reconciliation of all non-GAAP amounts to the most comparable GAAP amounts is provided later in this release), for the fourth quarter of fiscal 2017. As a reminder, the fourth quarter of fiscal 2017 included an extra week of operations as compared to the fourth quarter of fiscal 2018 due to a shift in the retail calendar. We estimate the impact of the extra week was approximately $0.09 per diluted share in fiscal 2017.

Comparable store sales increased 3.1% for the fourth quarter of fiscal 2018, compared to our guidance of flat to an increase of 2%. Net sales for the fourth quarter of fiscal 2018 were $1,598.6 million compared to $1,640.6 million for the same period last year as our increase in comparable stores sales for the fourth quarter of fiscal 2018 was more than offset by a lower store count year-over-year and the extra week of operations in fiscal 2017.

Commenting on today's announcement, Bruce Thorn, President and CEO of Big Lots stated, "After a slow start to the quarter, we experienced meaningful sales acceleration in December and January driving Q4 sales and earnings above the high end of our guidance.  Our holiday plans were well executed and led to broad based growth across the majority of our merchandise categories and a comp store sales increase in excess of 3% for the second consecutive quarter.  Our merchandise category results were supplemented by continued strong performance in our store of the future remodel efforts and our marketing and stores' focus on growth of our Rewards loyalty program."

Mr. Thorn continued, "I am particularly proud of the team's focus to deliver the all-important fourth quarter while also undertaking a strategic review of our competitive positioning and our opportunities for long-term, profitable sales growth.  As mentioned on our December earnings call, we've engaged an industry leading consultative firm to help us take an outside in view of our business and there was significant progress and learnings achieved during the quarter.  I look forward to sharing an update on this topic on our earnings call later this morning, and future updates in the months and quarters ahead."

FOURTH QUARTER HIGHLIGHTS

• Income of $2.68 per diluted share compared to last year's adjusted income of $2.57 per diluted share (non-GAAP), exceeding our previously communicated guidance of $2.20 to $2.40 per diluted share
• Comparable store sales increase 3.1%, exceeding our previously communicated guidance of flat to +2%

 

	Earnings per Share
		Q4 2018		Q4 2017		FY 2018		FY 2017
Earnings per diluted share		$2.68		$2.46		$3.83		$4.38
Impact of CEO retirement (1)		-		-		$0.15		-
Impact of settlement of shareholder litigation matters (1)		-		-		$0.06		-
Impact of write down of deferred tax assets (1)		-		$0.11		-		$0.10
Impact of gain from insurance recoveries (1)		-		-		-		($0.04)
Earnings per diluted share - adjusted basis		$2.68		$2.57		$4.04		$4.45
(1)  Non-GAAP detailed reconciliation provided in our statements below.

 

FISCAL 2018 HIGHLIGHTS

• Adjusted income of $4.04 per diluted share (non-GAAP), compared to fiscal 2017 adjusted income of $4.45 per diluted share (non-GAAP)
• Comparable store sales increase 1.2%
• Returned $151 million of cash to shareholders in the form of dividends and share repurchases

FISCAL 2018

For fiscal 2018, income totaled $156.9 million, or $3.83 per diluted share. Excluding non-recurring expenses associated with the retirement of our former CEO and the settlement of shareholder litigation matters reported in the first quarter of fiscal 2018, adjusted income for the full year period ended February 2, 2019, totaled $165.6 million, or $4.04 per diluted share (non-GAAP), compared to adjusted income of $192.5 million, or $4.45 per diluted share (non-GAAP), for fiscal 2017.

Comparable store sales increased 1.2% for fiscal 2018. Net sales for fiscal 2018 were $5,238.1 million compared to $5,264.4 million with the decrease resulting from a lower store count year-over-year and the extra week of operations in fiscal 2017, partially offset by the 1.2% comparable store sales increase.

Inventory and Cash Management

Inventory ended fiscal 2018 at $970 million, compared to $873 million for fiscal 2017, with the increase largely attributed to the strategic decision to deliver certain imported merchandise earlier than normal to minimize the risk associated with potential, incremental tariff related costs.  This growth was partially offset by a lower store count year-over-year.

We ended fiscal 2018 with $46 million of Cash and Cash Equivalents and $374 million of borrowings under our credit facility compared to $51 million of Cash and Cash Equivalents and $200 million of borrowings under our credit facility as of the end of fiscal 2017.

Total Cash Returned To Shareholders

For fiscal 2018, we returned $151 million of cash to shareholders in the form of quarterly dividend payments totaling $51 million and share repurchases totaling $100 million.

FISCAL 2019 GUIDANCE

• Forecasting fiscal 2019 adjusted income in the range of $3.55 to $3.75 per diluted share (non-GAAP) compared to fiscal 2018 adjusted income of $4.04 per diluted share (non-GAAP)
• Forecasting comparable store sales to increase in the low single digit range
• Forecasting cash flow (cash provided by operating activities less capital expenditures) of approximately $95 to $105 million
• Forecasting cash returned to shareholders of approximately $100 million, including share repurchases and quarterly dividend payments

We estimate fiscal 2019 adjusted income will be in the range of $3.55 to $3.75 per diluted share (non-GAAP), compared to adjusted income of $4.04 per diluted share (non-GAAP) for fiscal 2018. This guidance is based on a comparable store sales increase in the low single digit range and a total sales increase in the low singles. We estimate this financial performance will result in cash flow of approximately $95 to $105 million.

On March 6, 2019, our Board of Directors approved a share repurchase program ("2019 Share Repurchase Program") providing for the repurchase of up to $50 million of our common shares. The $50 million authorization is expected to be utilized to repurchase shares in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares acquired through the 2019 Share Repurchase Program will be available to meet obligations under equity compensation plans and for general corporate purposes. The 2019 Share Repurchase Program is eligible to begin on March 11, 2019 and will continue until exhausted.

As announced in a separate press release earlier today, on March 6, 2019, our Board of Directors declared a quarterly cash dividend for the first quarter of fiscal 2019 of $0.30 per common share. This dividend is payable on April 5, 2019, to shareholders of record as of the close of business on March 22, 2019.

Fiscal Q1 2019 Guidance

For the first quarter of fiscal 2019, we estimate adjusted income in the range of $0.65 to $0.75 per diluted share (non-GAAP) compared to last year's adjusted income of $0.95 per diluted share. This guidance assumes a comparable store sales increase in the low single digit range.

 

		Q1				Full Year
		2019 Guidance (1)		2018 (2)		2019 Guidance (1)		2018 (2)
Earnings per diluted share - adjusted		$0.65  -  $0.75		$0.95		$3.55  -  $3.75		$4.04
(1)  Excludes potential costs associated with strategy review and implementation.
(2)  Non-GAAP detailed reconciliation provided below.

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the fourth quarter of fiscal 2018 and provide commentary on our outlook for fiscal 2019. 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 after 12:00 noon today and will remain available through midnight on Friday, March 22, 2019. A replay of this call will also be available beginning today at 12:00 noon through March 22 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International) and entering Replay Passcode 8047456. All times are Eastern Time.

Headquartered in Columbus, Ohio, Big Lots, Inc. (NYSE: BIG) is a community retailer operating 1,401 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
			FEBRUARY 2		FEBRUARY 3
			2019		2018
			(Unaudited)		(Recast)
	ASSETS
Current assets:
	Cash and cash equivalents		$46,034		$51,176
	Inventories		969,561		872,790
	Other current assets		112,408		98,007
	Total current assets		1,128,003		1,021,973
Property and equipment - net			822,338		565,977
Deferred income taxes			8,633		13,986
Other assets			64,373		49,790
			$2,023,347		$1,651,726
	LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$396,903		$351,226
	Property, payroll and other taxes		75,317		80,863
	Accrued operating expenses		99,422		72,013
	Insurance reserves		38,883		38,517
	Accrued salaries and wages		26,798		39,321
	Income taxes payable		1,237		7,668
	Total current liabilities		638,560		589,608
Long-term obligations under bank credit facility			374,100		199,800
Deferred rent			60,700		58,246
Insurance reserves			54,507		55,015
Unrecognized tax benefits			14,189		14,929
Synthetic lease obligation			144,477		15,606
Other liabilities			43,773		48,935
Shareholders' equity			693,041		669,587
			$2,023,347		$1,651,726

 

 

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
			13 WEEKS ENDED			14 WEEKS ENDED
			FEBRUARY 2, 2019			FEBRUARY 3, 2018
				%			%
			(Unaudited)			(Unaudited)
Net sales			$1,598,551	100.0		$1,640,611	100.0
	Gross margin		659,344	41.2		682,041	41.6
	Selling and administrative expenses		476,893	29.8		484,556	29.5
	Depreciation expense		34,034	2.1		29,604	1.8
Operating profit			148,417	9.3		167,881	10.2
	Interest expense		(3,217)	(0.2)		(2,006)	(0.1)
	Other income (expense)		(1,274)	(0.1)		389	0.0
Income before income taxes			143,926	9.0		166,264	10.1
	Income tax expense		35,879	2.2		61,436	3.7
Net income			$108,047	6.8		$104,828	6.4
Earnings per common share
	Basic		$2.70			$2.50
	Diluted		$2.68			$2.46
Weighted average common shares outstanding
	Basic		40,043			41,878
	Dilutive effect of share-based awards		318			723
	Diluted		40,361			42,601
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)
			52 WEEKS ENDED			53 WEEKS ENDED
			FEBRUARY 2, 2019			FEBRUARY 3, 2018
				%			%
			(Unaudited)			(Unaudited)
Net sales			$5,238,105	100.0		$5,264,362	100.0
	Gross margin		2,121,895	40.5		2,142,442	40.7
	Selling and administrative expenses		1,778,416	34.0		1,723,996	32.7
	Depreciation expense		124,970	2.4		117,093	2.2
Operating profit			218,509	4.2		301,353	5.7
	Interest expense		(10,338)	(0.2)		(6,711)	(0.1)
	Other income (expense)		(558)	(0.0)		712	0.0
Income before income taxes			207,613	4.0		295,354	5.6
	Income tax expense		50,719	1.0		105,522	2.0
Net income			$156,894	3.0		$189,832	3.6
Earnings per common share
	Basic		$3.84			$4.43
	Diluted		$3.83			$4.38
Weighted average common shares outstanding
	Basic		40,809			42,818
	Dilutive effect of share-based awards		153			482
	Diluted		40,962			43,300
Cash dividends declared per common share			$1.20			$1.00

 

 

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
			13 WEEKS ENDED		14 WEEKS ENDED
			FEBRUARY 2, 2019		FEBRUARY 3, 2018
			(Unaudited)		(Unaudited)
	Net cash provided by operating activities		$193,640		$221,296
	Net cash used in investing activities		(95,440)		(63,215)
	Net cash used in financing activities		(114,104)		(164,917)
Decrease in cash and cash equivalents			(15,904)		(6,836)
	Cash and cash equivalents:
	Beginning of period		61,938		58,012
	End of period		$46,034		$51,176

 

 

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
			52 WEEKS ENDED		53 WEEKS ENDED
			FEBRUARY 2, 2019		FEBRUARY 3, 2018
			(Unaudited)		(Unaudited)
	Net cash provided by operating activities		$234,060		$250,368
	Net cash used in investing activities		(376,473)		(156,508)
	Net cash provided by (used in) financing activities		137,271		(93,848)
(Decrease) increase in cash and cash equivalents			(5,142)		12
	Cash and cash equivalents:
	Beginning of period		51,176		51,164
	End of period		$46,034		$51,176

 

 

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, effective income tax rate, net income, and diluted earnings per share for the full year 2018, the fourth quarter of 2017, the full year 2017, and the first quarter of 2018, (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, adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share (non-GAAP financial measures).

 

Full Year 2018 - Fifty-two weeks ended February 2, 2019
			As Reported		Adjustment to exclude CEO retirement costs		Adjustment to exclude shareholder litigation matter		As Adjusted (non-GAAP)
Selling and administrative expenses			$          1,778,416		$                     (7,018)		$                     (3,500)		$          1,767,898
Selling and administrative expense rate			34.0%		(0.1%)		(0.1%)		33.8%
Operating profit			218,509		7,018		3,500		229,027
Operating profit rate			4.2%		0.1%		0.1%		4.4%
Income tax expense			50,719		895		879		52,493
Effective income tax rate			24.4%		(0.4%)		(0.0%)		24.1%
Net income			156,894		6,123		2,621		165,638
Diluted earnings per share			$                    3.83		$                         0.15		$                         0.06		$                    4.04

 

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).

 

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.

 

First quarter of 2018 - Thirteen weeks ended May 5, 2018
			As Reported		Adjustment to exclude CEO retirement costs		Adjustment to exclude shareholder itigation matter		As Adjusted (non-GAAP)
Selling and administrative expenses			$             438,092		$                     (7,018)		$                     (3,500)		$             427,574
Selling and administrative expense rate			34.6%		(0.6%)		(0.3%)		33.7%
Operating profit			45,337		7,018		3,500		55,855
Operating profit rate			3.6%		0.6%		0.3%		4.4%
Income tax expense			13,030		895		879		14,804
Effective income tax rate			29.4%		(2.1%)		(0.3%)		27.0%
Net income			31,239		6,123		2,621		39,983
Diluted earnings per share			$                    0.74		$                         0.15		$                         0.06		$                    0.95

 

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) 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).

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.