Big Lots : Reports Third Quarter Results

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. 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.

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/big-lots-reports-third-quarter-results-300761715.html

SOURCE Big Lots, Inc.