Big Lots shares fall as retailer misses sales target
Shares of Big Lots fell more than 10 percent on Friday after the Columbus-based retailer announced fourth-quarter comparable-store sales that disappointed Wall Street. But while news wasn’t great for shareholders, it was for employees, as the company said it will improve wages and benefits, thanks to tax reform.
Big Lots reported sales of $1.64 billion for the fourth quarter, up from $1.58 billion in the same quarter a year ago. But analysts had expected sales of $1.66 billion.
The discount and closeout retailer did report income of $104.8 million, or $2.57 per share, for the fourth quarter, beating Wall Street expectations by 14 cents per share.
But comparable-store sales, a key indicator of a retailer’s health, fell by 0.1 percent. The company had predicted flat or slightly higher results, compared with the same time last year, said Lisa Bachmann, chief operating officer.
The mixed news left analysts low key in their assessment of the company’s outlook.
“We are cautious about same-store sales targets,” said analyst Efraim Levy of independent investment research firm CFRA in a note to investors. However, “we see consumers focused on value.”
Big Lots typically begins rolling out its spring lawn and garden seasonal merchandise during the fourth quarter, which this year ended on Feb. 3. While sales went well in warmer regions, other regions that were still struggling with cold and snow didn’t do well.
“Weather matters,” said Tim Johnson, chief financial officer. “It’s not an excuse, but it’s important that you understand that we understand where we’re off track or where we might have come up a little bit short in the fourth quarter.”
Big Lots, like most other retailers, expects to have a lower tax rate this year and will realize a cash benefit of about $35 million. The company plans to return approximately 30 percent of that cash to shareholders. The other 70 percent will go to improving the company’s wage and benefits plan.
“We understand looking forward that the market (for hiring and retaining employees) is shifting,” Johnson said, “and while we have a very comprehensive package for benefits that is more than just the wage rate ... we felt it was appropriate to reinvest some of those dollars to remain top-of-mind or remain an important employer in a lot of our markets.” Details were not available. Big Lots presented the earnings report without the presence of David Campisi, the retailer’s president and CEO, who remains on a medical leave that began in early December.
During Campisi’s leave, his executive responsibilities are continuing to be overseen by Bachmann and Johnson. In addition, James R. Chambers, the company’s non-executive chairman of the board, is spending additional time with company executives.