Big Lots(BIG)2022-08-30 14:37Financial Data and Key Metrics Changes - Q2 net sales were 1.457 billion a year ago, driven by a comparable sales decrease of 9.2% [33] - Adjusted net loss for Q2 was 38 million in Q2 of 2021, with adjusted diluted loss per share at 1.09 last year [36] - Gross margin rate for Q2 was 32.6%, down approximately 700 basis points from the previous year, impacted by higher markdowns and freight costs [36][40] - Adjusted operating margin for the quarter was negative 6.3%, compared to a profit of 3.7% in 2021 [39] Business Line Data and Key Metrics Changes - Seasonal comps grew strongly, up roughly 30% in Q2 on both a one-year and three-year comp basis [19] - The furniture category faced challenges, with consumers delaying or cutting back on higher ticket purchases [21] - E-commerce business was up 35% in Q2, representing 7% of total business, with same-day delivery growing over 80% [23] Market Data and Key Metrics Changes - Customer reactivations through the loyalty program increased by 16% [17] - The company noted that lower-income customers have been more affected by inflation, impacting discretionary purchases [7] Company Strategy and Development Direction - The company is focused on repositioning its assortment towards better bargains, closeouts, and lower price points while enhancing everyday essentials [5][8] - Plans to increase the proportion of bargains and closeouts to one-third of the business over time [14] - The company is enhancing its supply chain visibility and investing in new tools to improve efficiency [28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment but expressed confidence in the company's ability to navigate it and improve results [9][29] - The company expects Q3 sales to remain uncertain, with one-year comps projected to be down in the low double-digit range [46] - Management is optimistic about Q4, expecting improved gross margins and sales momentum due to cleaner inventory levels [48][49] Other Important Information - The company opened 11 new stores and closed three, ending Q2 with 1,442 stores [41] - A quarterly cash dividend of $0.30 per common share was declared for Q2 [45] - The company is planning to sell approximately 25 underperforming stores and is evaluating sale leaseback proposals for remaining owned stores [43][96] Q&A Session Summary Question: How is the company preparing for the holiday season given current trends? - Management indicated a good holiday plan is in place, with tailored assortments and strong stock of necessities [61][62] Question: What is driving the growth in SG&A for Q3? - The increase is primarily due to transportation expenses and costs related to new forward distribution centers [63] Question: Can you provide insights on current trends and inventory management? - Trends are generally consistent with Q2, with a focus on managing seasonal inventory effectively [66][68] Question: What is the rationale behind the sale leaseback strategy? - The strategy involves selling underperforming stores and considering leaseback proposals for others to strengthen the balance sheet [95][96]