Big Lots’ Q4: sales of pet products, food stand out

Off-price retailer Big Lots on Thursday said it is making progress on its turnaround efforts, and was optimistic in its outlook for 2024, including in the food and consumables categories.

Comparable-store sales improved “modestly” in food and consumables categories in the fourth quarter, relative to the third quarter, on a year-over-year basis, the company said in a conference call discussing results for the fiscal year, which ended Feb. 3. 

“We are focused on accelerating the penetration of extreme bargains, particularly in the food category, which should drive more significant improvements going forward,” said Bruce Thorn, president and CEO.

Extreme bargains in food categories are often priced 10-20% below the prices offered at other discounters, he explained.

The pet products category was a standout in the fourth quarter, he said, with positive comp-sales growth driven by the expansion of the company’s assortment last fall.

Overall, Big Lots reported a loss of $30.7 million for the 14-week fourth quarter, vs. a loss of $12.5 million in the 13-week, year-ago period. Sales in the quarter were down about 7.2%, to about $1.43 billion, as comparable-store sales fell 8.6%.

The quarterly loss included a net, after-tax loss of $22.4 million for costs associated with distribution-center closures and other charges. The adjusted net loss for the quarter was $8.3 million, compared with an adjusted net loss of $8.1 million in the year-ago fourth quarter.

Related:Instacart adds Big Lots to retail partner base

Despite the ongoing losses, the company said its fourth quarter yielded the first quarterly adjusted operating profit in two years.

For the full, 53-week fiscal year, the loss more than doubled, to $481.9 million, on a sales decrease of 13.6%, to $4.72 billion, compared with the 52-week period of a year-ago.

Thorn said the retailer has a multi-pronged strategy to drive sales and improve profitability, including focusing on more extreme bargains across the store.

“These extreme bargains create a more exciting treasure hunt experience, which will keep our customers coming back to our stores and help drive comparable sales growth,” he said.

The company has been aggressively pursuing opportunities for extreme bargains, Thorn said, including in food categories.

“We’re early in our journey on offering more extreme bargains, but we’ve already had strong sell-through on some of our food offerings, such as coffee and cereal, as well as in hair care, bedding, laundry, and cookware,” he said.

Big Lots has also focused its marketing efforts more sharply on calling attention to the availability of bargains, such as with its recently launched “Bargains to Brag About” ad campaign.

The retailer is also adding inventory in top-performing categories and stores, and reducing inventory in lower-performing categories and stores, said Thorn. This creates more opportunities for high-performing categories such as pet products, and for more productive SKUs, “particularly in food and consumables,” he added.

The company is also focused on merchandising “less depth and more breadth” in its assortments, seeking to drive customers to act quickly and shop more frequently to find deals.

In addition, Big Lots is taking steps to improve store operations and boost the omnichannel experience. In the fourth quarter, it launched its first mobile app for customers, and also began partnering with Uber Eats for delivery.

Big Lots said it expects sequential, comp-sales improvement in the first quarter, although comps are still expected to be in the “negative mid-single-digit range.” The company also said it expects ongoing gross margin improvements, driven by reduced markdown activity, lower freight costs, and cost reduction and productivity initiatives.

The company, which operates more than 1,300 stores in 48 states, said it plans four store openings in 2024, all of which will be in the third quarter. Three of those planned openings were originally scheduled for 2023, and one is a relocation.

“In general, all new store commitments remain on hold until our business situation improves,” said Jonathan Ramsden, executive VP and chief financial officer.