Big Lots Forecasted to Meet Previous Guidance Following Q4 Performance Preview
On Monday, KeyBanc maintained a Sector Weight rating on shares of Big Lots, following the company’s preliminary comments on its fourth-quarter performance.
The retailer indicated that comparable store sales, gross margin, operating expenses, and inventory levels are anticipated to align with previous guidance.
Big Lots reported generating over $100 million in cash from inventory reduction during the quarter, partly utilized to reduce debt. The company has been experiencing cash burn, but management remains optimistic about potential improvements in sales and EBITDA.
Additionally, Big Lots has identified $100 million to $150 million in other assets that could be liquidated if necessary.
Despite these positive steps, KeyBanc expressed caution regarding the near-term consumer environment, especially concerning Big Lots’ home-related categories.
KeyBanc slightly adjusted its estimates for Big Lots, fine-tuning the forecast based on the pre-announcement details.
The retailer’s efforts to manage cash flow and debt, alongside the introduction of new products, anticipated lower freight costs, and productivity initiatives, present opportunities for the company. However, the uncertain consumer landscape continues to pose a risk to Big Lots’ financial health, prompting the firm’s cautious stance.
As Big Lots navigates a challenging retail environment, data reflects the company’s financial situation. The market capitalization currently stands at a modest $109.48 million, signaling how investors assess the company’s value.
Despite efforts to manage cash flow, Big Lots operates with a significant debt burden, which is crucial for investors to consider. This is compounded by a negative P/E ratio for the last twelve months as of Q3 2024, at -0.31, indicating the company is not currently profitable.
The anticipated sales decline in the current year aligns with a reported revenue growth decrease of 14.57% over the last twelve months as of Q3 2024.
The stock has experienced significant price volatility, with a 1-month price total return of -15.99% and a 6-month return of -36.94%, yet it showed a strong rebound over the last three months with a return of 43.7%.
The dividend yield is notably high at 22.39%, which may be attractive to income-focused investors, especially considering that Big Lots has maintained dividend payments for 10 consecutive years.
Analyst comment
Positive news: Big Lots is expected to meet previous guidance for sales, gross margin, operating expenses, and inventory levels. They have generated over $100 million in cash from inventory reduction, partly used to reduce debt. The company is optimistic about potential improvements in sales and EBITDA. Analytical forecast: The market may respond positively to Big Lots’ performance and cash flow management, but caution is advised due to the uncertain consumer environment and the company’s significant debt burden.
