Big Lots’ losses are worsening as its sales decline continues – something an analyst blamed on the company’s “lackluster” assortment and uncompetitive prices amid weak consumer sentiment.
The net loss stood at $481.9 million on net sales down by what GlobalData MD Neil Saunders described as an “eyewatering” 13.6 per cent to $4.72 billion.
“This is an enormous erosion in demand that simply cannot be pinned on the general softness of the consumer economy,” GlobalData MD Neil Saunders said.
“In our view, there are two central issues with Big Lots. The first is that the assortment is very jumbled and muddled, which is partly a function of the way the business operates… The other, somewhat larger, problem is that despite its strapline of being “America’s Home Discount Store”, Big Lots is not always particularly good value for money.”
Saunders noted that while Big Lots items are not drastically expensive, a customer can find a more affordable equivalent product at other stores such as Target and Walmart.
Big Lots’ fourth-quarter net loss was $30.7 million while net sales declined 7.2 per cent to $1.43 billion.
For the first quarter of this fiscal year, the company forecasts comparable sales to improve relative to the fourth quarter of the previous year.
“We are excited to return to comp sales growth as 2024 progresses, driven by continued progress on these key actions, and to significantly improve our gross margin in every quarter versus last year,” Big Lots president and CEO Bruce Thorn.
However, Saunders said that while management is eager to emphasize that the fourth quarter was materially better than the three that preceded it – which is true in a way – “it is very much a case of the numbers being a little less terrible than they have been, rather than a signal that Big Lots is back on track”.
While the company had sufficient resources to continue trading – and some assets it could dispose of if needed in order to stay afloat – the company’s long-term prognosis was not great.
“With $406 million of debt piled on the balance sheet and yet another poor performance during the final quarter, doubts about the chain’s ability to survive continue to swirl.
“While management is trying to tighten operations and control finances better, the year ahead looks like it will be another one of decline. The company has reasonable liquidity for the short term and can monetize some assets if needed, so it can survive for the next half year or so. However, question marks remain over the longer term, especially if management fails to pull back lost shoppers and win over new ones,” Saunders concluded.
