Shares of home discount retailer Big Lots (NYSE:BIG) have surged nearly 14% at the time of writing today after announcing a better-than-expected set of second-quarter numbers with improving margins. While revenue declined by 15.6% year-over-year to $1.14 billion, the figure still exceeded expectations by $40 million. Moreover, the net loss per share of $3.24 also came in narrower than estimates by an impressive margin of $0.87.
The drop in the topline was attributable to a 14.6% decrease in comparable sales and a reduction in the company’s store count. The macroeconomic environment remains challenging, and the company noted that its core lower-income customers are under pressure with limited bandwidth for higher-ticket discretionary purchases.
At the same time, Big Lots is on track to realize SG&A cost savings of nearly $100 million for the year and foresees additional opportunities to drive down expenses by more than $200 million. The major chunk of these benefits is anticipated to be realized by the end of next year.
Looking ahead to the third quarter, Big Lots expects comparable sales to decline in the low-teen range. The company also anticipates a nearly 200 basis-point improvement in gross margin for the quarter.
Furthermore, Big Lots expects comparable sales to improve sequentially in the fourth quarter, with gross margin improving to a high-30s range on the back of lower freight costs, productivity initiatives, and a normalized markdown activity.
Overall, the Street has a consensus price target of $7.70 on Big Lots, along with a Hold consensus rating. Today’s price gain comes after a nearly 71% erosion in the company’s share price over the past year.
Read full Disclosure
