Big Lots(BIG)2024-06-06 14:39Financial Data and Key Metrics Changes - Q1 net sales were 1.12 billion a year ago, driven by a comparable sales decrease of 9.9% [31] - The gross margin rate for the quarter was 36.8%, up 190 basis points year-over-year, primarily due to reduced markdowns and benefits from Project Springboard [11] - Adjusted operating margin for the quarter was negative 11.9%, with interest expense increasing to 9.1 million a year ago [12][31] - Total ending inventory cost was down 12.7% year-over-year, driven by lower on-hand units and average unit cost [13] Business Line Data and Key Metrics Changes - Seasonal comps decelerated relative to Q4, particularly in high-ticket discretionary items like patio furniture and gazebos, while core items and seasonal assortments performed positively [5] - The toy category saw nearly a 50% increase in sales in April, driven by the Hearthsong closeout deal [6] - Grocery SKU count increased by 150%, and personal care extreme value SKU count increased sevenfold year-over-year [7] Market Data and Key Metrics Changes - Comp sales trends were down 9.9% in Q1, missing guidance due to volatility in consumer sentiment and weather impacts [10][99] - The company expects sequential comp sales improvement in Q2, projecting a negative mid-to-high single-digit range [14] Company Strategy and Development Direction - The company is focused on five key actions: owning bargains, communicating unmistakable value, increasing store relevance, winning customers for life, and driving productivity [101] - The goal is to achieve 75% bargain penetration and 50% extreme bargain penetration by year-end [81][108] - Project Springboard is expected to deliver 175 million [17][83] Management's Comments on Operating Environment and Future Outlook - The management expressed cautious optimism for Q2, noting improvements in sales trends and expectations for gross margin rate improvement [39][61] - The consumer environment remains challenging, particularly for lower-income households, but the company is focused on managing through the cycle [79][99] - Management highlighted the importance of extreme bargains in driving sales and improving consumer perceptions [102][108] Other Important Information - The company ended Q1 with 254 million in Q4 [86] - The company is implementing a simplified store operation strategy to enhance efficiency and customer experience [22][83] Q&A Session Summary Question: Can you quantify category performance between bargains, extreme bargains, and the rest? - Management noted that extreme bargain penetration is deepening across all categories, with positive comps in upholstery furniture driven by extreme bargains [41][42] Question: How do you view supply for the remainder of the year? - The closeout rate for extreme bargains is at 28%, the highest in nearly a decade, with no signs of slowing down [53][75] Question: Can you elaborate on gross margin improvement throughout the year? - Management expects gross margin rate improvement to accelerate from Q1 to Q2, projecting at least 300 basis points of improvement in Q2 [65] Question: Did you witness any changes in core customer purchasing behavior? - The core customer, particularly lower-income households, has been pulling back on large discretionary items, but there are signs of normalization in Q2 [68][72]