Big Lots Q2 Results Miss Estimates; Shares Fall 5%

Discount retailer Big Lots (BIG) reported disappointing Fiscal Q2 results for the period ended July 31, 2021. Revenue and earnings fell short of consensus estimates as the company experienced the full force of supply chain and freight headwinds. Shares plunged 4.85% to close at $51.62 on Friday, August 27.

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Net sales fell 11.4% year-over-year to $1.46 billion compared to $1.64 billion reported in the same quarter last year. The decline was primarily driven by a 13.2% decrease in comparable sales. Results also missed the consensus estimate of $1.48 billion.

Big Lots recorded quarterly net income of $37.71 million compared to $451.97 million delivered in the same quarter last year. Diluted EPS for Q2 was $1.09, below analysts’ estimates of $1.13, and a significant drop from the $11.29 reported in the same quarter last year. Results were negatively affected by supply chain issues and inflationary pressures. (See Big Lots stock charts on TipRanks)

Warning against supply chain headwinds that could persist going forward, CEO Bruce Thorn said, “Our team is working exceptionally hard to get through this and make sure that our assortments continue to surprise our customers and deliver phenomenal value! Our 30,000+ Big Lots associates are committed to our mission of helping our customers Live Big and Save Lots.”

Additionally, Big Lots’ Board of Directors has approved a quarterly cash dividend of $0.30 per common share to be paid on September 24, 2021, to shareholders of record as of September 10, 2021.

Following the Q2 results, Telsey Advisory analyst Joe Feldman downgraded Big Lots to Hold from Buy with a $72 price target, implying 39.48% upside potential to current levels.

According to the analyst, the company’s near-term performance is clouded, given the higher supply chain and freight expenses expected to continue into 2022.

“We understand Big Lots has already guided down 2021, but we are concerned that 2022 earnings could come down significantly as these cost pressures continue into next year,” Feldman stated.

Consensus among analysts is a Hold based on 2 Buys, 4 Holds, and 1 Sell. The average Big Lots price target of $63.20 implies 22.43% upside potential to current levels.