Big Lots in Big Trouble? Analyst Foresees Furniture Fiasco and Slashes Price Target

  • Telsey Advisory Group analyst Joseph Feldman reiterated a Market Perform rating on the shares of Big Lots Inc BIG and lowered the price target from $15 to $9.
  • The furniture and home decor retailer is slated to report 1Q23 earnings on Friday, May 26.
  • The analyst forecasts a total sales decline of 13.6% to $1.19 billion, with comparable sales decline of 14.0% versus the FactSet consensus (FS) of 13.2% decline and the guidance of down low-to-mid teens, given softer consumer spending on discretionary categories.
  • The analyst said the closing of Big Lots’s top furniture vendor, United Furniture Industries, in late 2022 should continue to pressure results, with inflation also likely to keep consumer spending tempered.
  • The analyst projects operating margin compression of 485 basis points to a 5.8% loss versus the consensus of 5.1% loss.
  • The margin shrink reflects SG&A expense ratio deleverage of 615 basis points to 43.8%, given accelerated depreciation related to store closures and higher occupancy and distribution costs, noted the analyst.
  • The continued tough macro trends and recent comments from other retailers, including Target TGT and Walmart WMT about slow sales in February through April makes analyst believe that business is likely to remain under pressure in the near term.
  • The analyst has lowered the 2023 EPS estimate to a $4.05 loss, from a $3.34 loss versus FS at $4.76 loss and sales down 5.4% on a comp of 6.9% decline versus FS at a 6.6% decline.
  • The estimate reflects the continued soft consumer spending environment, particularly related to big-ticket and discretionary products, such as furniture, said the analyst.
  • Price Action: BIG shares are trading higher by 0.89% at $7.95 on the last check Monday.
  • Photo via Wikimedia Commons
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