Big Lots reports fiscal Q1 earnings of US$32.3M, down 20.6% from a year ago, sales of US$1.31B, up 1.3%, comparable-store sales decline of 2.5%; company projects fiscal 2013 sales growth of 1%-2%, flat to -1% comparable-store sales
Cindy Allen
COLUMBUS, Ohio
,
May 30, 2013
(press release)
–
Big Lots, Inc. (BIG) today reported consolidated income from continuing operations of $32.3 million, or $0.56 per diluted share, for the first quarter of fiscal 2013 ended May 4, 2013. This result includes a non-recurring, after-tax charge of $3.2 million, or $0.06 per diluted share, associated with store-related legal activity. Excluding this non-recurring charge, adjusted consolidated income from continuing operations totaled $35.5 million, or $0.61 per diluted share (non-GAAP), consistent with our guidance of $0.53 to $0.65 per diluted share issued on March 6, 2013. This result compares to adjusted consolidated income from continuing operations of $44.2 million, or $0.68 per diluted share (non-GAAP), for the first quarter of fiscal 2012. Consolidated net sales for the first quarter of fiscal 2013 increased 1.3% to $1,311.3 million, compared to $1,294.5 million for the same period of fiscal 2012. Consolidated comparable store sales decreased 2.5% for the quarter, consistent with our guidance of negative low single digits. (Logo:
http://photos.prnewswire.com/prnh/20011026/BIGLOTSLOGO)
FIRST QUARTER HIGHLIGHTS EPS From Continuing Operations (1) Q1 2013 Q1 2012 U.S. Operations $0.64 $0.72 Add back non-recurring charges $0.06 $0.05 U.S. Operations - adjusted basis $0.69 $0.77 Canadian Operations ($0.08) ($0.09) Consolidated Operations - adjusted basis $0.61 $0.68 (1) Non-GAAP. See detailed segment reporting below. First Quarter Results U.S. Operations Net sales for U.S. operations for the first quarter of fiscal 2013 increased 1.0% to $1,274.7 million, compared to $1,262.2 million for the same period of fiscal 2012. Comparable store sales for U.S. stores open at least fifteen months decreased 2.9% for the quarter. Adjusted income from continuing U.S. operations totaled $40.0 million, or $0.69 per diluted share (non-GAAP), compared to adjusted income from continuing U.S. operations of $50.3 million, or $0.77 per diluted share (non-GAAP), for the same period of fiscal 2012. Results for our U.S. operations were consistent with our communicated guidance. Canadian Operations Net sales for Canadian operations for the first quarter of fiscal 2013 increased 13.5% to $36.6 million, while comparable stores sales increased 13.2%. For the first quarter of fiscal 2013, we incurred a net loss of $4.4 million, or $0.08 per diluted share (non-GAAP), compared to a net loss of $6.1 million, or $0.09 per diluted share (non-GAAP) for the same period of fiscal 2012. Results for our Canadian operations were consistent with our communicated guidance. Comparable Store Sales Store Count Q1 2013 Q1 2012 Q1 2013 Q1 2012 U.S. Operations -2.9% -0.8% 1,505 1,454 Canadian Operations (1) +13.2% na 80 82 Consolidated Operations -2.5% -0.8% 1,585 1,536 (1) Comparable store sales for Canada for fiscal 2012 do not qualify under our calculation due to an acquisition date of July 2011. Inventory and Cash Management On a consolidated basis, Inventory ended the first quarter of fiscal 2013 at $885 million, compared to $848 million for the first quarter of fiscal 2012. The growth in inventory was driven by an increase in U.S. store count, as inventory per store in our U.S. stores was essentially flat to last year. We ended the first quarter of fiscal 2013 with $72 million of Cash and Cash Equivalents and $137 million of borrowings under our credit facility compared to $83 million of Cash and Cash Equivalents and no borrowings under our credit facility as of the end of the first quarter of fiscal 2012. Our use of cash generated by our U.S. operations and debt incurred during the last 12 months was focused on share repurchase activity and funding our Canadian operations. As part of our ongoing focus on capital structure, we have extended our current $700 million, 5-year unsecured credit facility. The strength of our credit profile, operations, balance sheet and cash flow generation, enabled us to work collaboratively with our existing banking group to extend the term of our current credit facility by nearly two years. The credit facility now covers a five year period (expiration May 2018), provides us lower rates and fees, and maintains the same structure, bank participants, and financial covenants as our previous facility. FISCAL Q2 2013 GUIDANCE For the second quarter of fiscal 2013, we estimate consolidated income from continuing operations will be in the range of $0.17 to $0.27 per diluted share, compared to consolidated income from continuing operations of $0.36 per diluted share for the second quarter of fiscal 2012. This guidance is based on estimated consolidated net sales in the range of +1% to -1% for the second quarter of fiscal 2013 and consolidated comparable store sales in the range of -2% to -4% (see table below). We estimate income from U.S. operations in a range of $0.27 to $0.32 per diluted share (non-GAAP, see reconciliation below), compared to $0.42 per diluted share (non-GAAP) for the same period last year. This guidance is based on estimated net sales for U.S. operations in the range of +1% to -1% for the second quarter of fiscal 2013 and comparable store sales in the range of -2% to -4%. We estimate a loss from our Canadian operations in the range of $3 to $6 million, or $0.05 to $0.10 per diluted share (non-GAAP), compared to a loss of $3.3 million, or $0.05 per diluted share (non-GAAP), for the second quarter of fiscal 2012. This guidance is based on estimated net sales of $37 to $41 million and a comparable store sales increase in the range of 4% to 14%. 2013 OUTLOOK Based on the actual results for the first quarter and the guidance provided above for the second quarter, we are updating our full year fiscal 2013 outlook. We estimate fiscal 2013 adjusted consolidated income from continuing operations will be in the range of $2.87 to $3.12 per diluted share (non-GAAP, see reconciliation below) compared to adjusted consolidated income from continuing operations of $2.99 per diluted share for fiscal 2012 (non-GAAP). This outlook excludes the previously mentioned non-recurring charge associated with store-related legal activity and is based on an estimated consolidated net sales increase in the range of 1% to 2% for fiscal 2013 and consolidated comparable store sales in the range of 0% to -1% (see table below). We estimate this financial performance will result in cash flow of approximately $175 million in fiscal 2013. As a reminder, we are operating under a 52-week retail calendar compared to 53-weeks in fiscal 2012. U.S. Operations We are forecasting adjusted income from continuing U.S. operations to be in the range of $3.00 to $3.20 per diluted share (non-GAAP), compared to fiscal 2012 adjusted income from continuing U.S. operations of $3.21 per diluted share (non-GAAP). This outlook excludes the previously mentioned non-recurring charge associated with store-related legal activity and is based on an estimated net sales increase for U.S. operations in the range of 1% to 2% and comparable store sales for U.S. operations in the range of 0% to -1%. Canadian Operations Canadian net sales are expected to be in the range of $175 to $185 million for fiscal 2013, resulting in a net loss in the range of $5 to $8 million, or $0.08 to $0.13 per diluted share (non-GAAP). This compares to a net loss for fiscal 2012 of $13.5 million, or $0.22 per diluted share (non-GAAP). Our outlook for fiscal 2013 is based on a Canadian net sales increase in the range of 13% to 20% and a comparable store sales increase in the range of 12% to 19%. From a real estate perspective, we expect to open 2 new stores in Canada under the Big Lots banner. EPS from Continuing Operations (non-GAAP) Q2 Full Year 2013 Guidance 2012 2013 Guidance 2012 U.S. Operations $0.27 - $0.32 $0.42 $2.95 - $3.15 $3.15 Add back non-recurring charge - - $0.05 $0.06 U.S. Operations - adjusted basis $0.27 - $0.32 $0.42 $3.00 - $3.20 $3.21 Canadian Operations ($0.10) - ($0.05) ($0.05) ($0.13) - ($0.08) ($0.22) Consolidated Operations - adjusted basis $0.17 - $0.27 $0.36 $2.87 - $3.12 $2.99 Sales Guidance Q2 2013 Full Year 2013 Total Sales Comp Total Sales Comp U.S. Operations +1% to -1% -2% to -4% +1% to +2% 0% to -1% Canadian Operations +6% to +17% +4% to +14% +13% to +20% +12% to +19% Consolidated Operations +1% to -1% -2% to -4% +1% to +2% 0% to -1% Conference Call/Webcast We will host a conference call today at 8:00 a.m. to discuss our financial results for the first quarter and provide commentary on our outlook for fiscal 2013. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website (www.biglots.com). If you are unable to join the live webcast, an archive of the call will be available through the Investor Relations section of our website (www.biglots.com) beginning two hours after the call ends and will remain available through midnight on Thursday, June 20. A replay of the call will be available beginning today at 12:00 noon through June 20 at midnight by dialing: 1.888.203.1112 (United States and Canada) or 1.719.457.0820 (International). The Replay Confirmation Code is 6565635. All times are Eastern Time. Big Lots is North America's largest broadline closeout retailer. As of the end of the first quarter of fiscal 2013, we operated 1,505 BIG LOTS stores in the 48 contiguous United States, 1 BIG LOTS store in Canada, and 79 LIQUIDATION WORLD and LW stores in Canada. Wholesale operations are conducted through BIG LOTS WHOLESALE, CONSOLIDATED INTERNATIONAL, and WISCONSIN TOY and with online sales at www.biglotswholesale.com. Cautionary Statement Concerning Forward-Looking Statements Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," "outlook" and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are and will be based upon management's then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. Although we believe the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect our business, financial condition, results of operations or liquidity. Forward-looking statements that we make herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including, but not limited to, the current economic and credit crisis, the cost of goods, our inability to successfully execute strategic initiatives, competitive pressures, economic pressures on our customers and us, the availability of brand name closeout merchandise, trade restrictions, freight costs, the risks discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, and other factors discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This release should be read in conjunction with such filings, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings. BIG LOTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) MAY 4 APRIL 28 2013 2012 (Unaudited) (Unaudited) ASSETS Current assets: Cash and cash equivalents $71,669 $82,571 Inventories 884,846 847,655 Deferred income taxes 43,148 45,997 Other current assets 75,078 68,646 Total current assets 1,074,741 1,044,869 Property and equipment - net 583,496 569,146 Deferred income taxes 8,716 3,402 Goodwill 13,385 15,030 Other assets 56,425 44,358 $1,736,763 $1,676,805 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $362,421 $433,505 Property, payroll and other taxes 74,937 79,106 Accrued operating expenses 67,309 100,327 Insurance reserves 36,414 35,441 KB bankruptcy lease obligation 3,069 3,069 Accrued salaries and wages 27,194 25,307 Income taxes payable 36,129 19,303 Total current liabilities 607,473 696,058 Long-term obligations under bank credit facility 137,200 0 Deferred rent 76,400 62,016 Insurance reserves 63,447 50,811 Unrecognized tax benefits 16,845 17,274 Other liabilities 39,485 41,219 Shareholders' equity 795,913 809,427 $1,736,763 $1,676,805 BIG LOTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) 13 WEEKS ENDED 13 WEEKS ENDED MAY 4, 2013 APRIL 28, 2012 % % (Unaudited) (Unaudited) Net sales $1,311,338 100.0 $1,294,481 100.0 Gross margin 516,629 39.4 512,449 39.6 Selling and administrative expenses 432,467 33.0 418,319 32.3 Depreciation expense 27,470 2.1 25,288 2.0 Operating profit 56,692 4.3 68,842 5.3 Interest expense (726) (0.1) (336) (0.0) Other (expense) income (146) (0.0) 37 0.0 Income from continuing operations before income taxes 55,820 4.3 68,543 5.3 Income tax expense 23,487 1.8 27,763 2.1 Income from continuing operations 32,333 2.5 40,780 3.2 Loss from discontinued operations, net of tax benefit of $0 and $22, respectively 0 0.0 (34) (0.0) Net income $32,333 2.5 $40,746 3.1 Earnings per common share - basic (a) Continuing operations $0.56 $0.64 Discontinued operations 0.00 0.00 Net income $0.56 $0.64 Earnings per common share - diluted (a) Continuing operations $0.56 $0.63 Discontinued operations 0.00 0.00 Net income $0.56 $0.63 Weighted average common shares outstanding Basic 57,305 64,119 Dilutive effect of share-based awards 538 1,046 Diluted 57,843 65,165 (a) The earnings per share for Continuing Operations, Discontinued Operations and Net Income are separately calculated in accordance with accounting pronouncements; therefore, the sum of earnings per share for Continuing Operations and Discontinued Operations may differ, due to rounding, from the calculated earnings per share of Net Income. BIG LOTS, INC. AND SUBSIDIARIES SEGMENT OPERATING PERFORMANCE (In thousands, except per share data) 13 WEEKS ENDED MAY 4, 2013 APRIL 28, 2012 MAY 4, 2013 APRIL 28, 2012 U.S. U.S. Canada Canada (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $1,274,744 $1,262,235 $36,594 $32,246 Gross margin 503,090 500,945 13,539 11,504 Selling and administrative expenses 415,219 401,526 17,248 16,793 Depreciation expense 26,880 24,424 590 864 Operating profit (loss) 60,991 74,995 (4,299) (6,153) Interest expense (726) (336) 0 0 Other income (expense) 0 0 (146) 37 Income (loss) from continuing operations before income taxes 60,265 74,659 (4,445) (6,116) Income tax expense 23,487 27,763 0 0 Income (loss) from continuing operations 36,778 46,896 (4,445) (6,116) Diluted earnings (loss) per common share from continuing operations (a) $0.64 $0.72 ($0.08) ($0.09) (a) The diluted earnings (loss) per share from continuing operations by segment are separately calculated; therefore, the sum of diluted earnings (loss) per share from continuing operations by segment may differ, due to rounding, from the calculated consolidated diluted (loss) earnings per share from continuing operations. Diluted earnings (loss) per share from continuing operations by segment is a "non-GAAP financial measure," as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229), which our management believes is useful information to investors. BIG LOTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 13 WEEKS ENDED 13 WEEKS ENDED MAY 4, 2013 APRIL 28, 2012 (Unaudited) (Unaudited) Net cash provided by operating activities $60,183 $125,582 Net cash used in investing activities (15,823) (17,989) Net cash used in financing activities (33,164) (93,648) Impact of foreign currency on cash (108) 79 Increase in cash and cash equivalents 11,088 14,024 Cash and cash equivalents: Beginning of period 60,581 68,547 End of period $71,669 $82,571 BIG LOTS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) The following tables reconcile: (1) selling and administrative expenses, selling and administrative expense rate, operating profit, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for the first quarter of 2013 (GAAP financial measures) to adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share (non-GAAP financial measures); and (2) gross margin, gross margin rate, operating profit, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for the first quarter of 2012 (GAAP financial measures) to adjusted gross margin, adjusted gross margin rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share (non-GAAP financial measures). First quarter of 2013 - Thirteen weeks ended May 4, 2013 Consolidated Results As reported Adjustment to exclude loss contingency As Adjusted (non-GAAP) Selling and administrative expenses $ 432,467 $ (5,052) $ 427,415 Selling and administrative expense rate 33.0% (0.4%) 32.6% Operating profit 56,692 5,052 61,744 Operating profit rate 4.3% 0.4% 4.7% Income tax expense 23,487 1,862 25,349 Effective income tax rate 42.1% 0.5% 41.6% Income from continuing operations 32,333 3,190 35,523 Net income 32,333 3,190 35,523 Diluted earnings per share from continuing operations $ 0.56 $ 0.06 $ 0.61 Diluted earnings per share $ 0.56 $ 0.06 $ 0.61 U.S. Segment Results As reported Adjustment to exclude loss contingency As Adjusted (non-GAAP) Selling and administrative expenses $ 415,219 $ (5,052) $ 410,167 Selling and administrative expense rate 32.6% (0.4%) 32.2% Operating profit 60,991 5,052 66,043 Operating profit rate 4.8% 0.4% 5.2% Income tax expense 23,487 1,862 25,349 Effective income tax rate 39.0% (0.2%) 38.8% Income from continuing operations 36,778 3,190 39,968 Diluted earnings per share from continuing operations $ 0.64 $ 0.06 $ 0.69 The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") a pretax accrual of a loss contingency related to legal matters of $5,052 ($3,190, net of tax). First quarter of 2012 - Thirteen weeks ended April 28, 2012 Consolidated Results As reported Adjustment to exclude change in inventory accounting principle As Adjusted (non-GAAP) Gross margin $ 512,449 $ 5,574 $ 518,023 Gross margin rate 39.6% 0.4% 40.0% Operating profit 68,842 5,574 74,416 Operating profit rate 5.3% 0.4% 5.7% Income tax expense 27,763 2,186 29,949 Effective income tax rate 40.5% (0.1%) 40.4% Income from continuing operations 40,780 3,388 44,168 Net income 40,746 3,388 44,134 Diluted earnings per share from continuing operations $ 0.63 $ 0.05 $ 0.68 Diluted earnings per share $ 0.63 $ 0.05 $ 0.68 U.S. Segment Results As reported Adjustment to exclude change in inventory accounting principle As Adjusted (non-GAAP) Gross margin $ 500,945 $ 5,574 $ 506,519 Gross margin rate 39.7% 0.4% 40.1% Operating profit 74,995 5,574 80,569 Operating profit rate 5.9% 0.5% 6.4% Income tax expense 27,763 2,186 29,949 Effective income tax rate 37.2% 0.1% 37.3% Income from continuing operations 46,896 3,388 50,284 Diluted earnings per share from continuing operations $ 0.72 $ 0.05 $ 0.77 The above adjusted gross margin, adjusted gross margin rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") a pretax charge for a change in an accounting principle associated with our implementation of new inventory management information systems of $5,574 ($3,388, net of tax). Our management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative and more relevant method for measuring our operating performance, excluding special items included in the most directly comparable GAAP financial measures, that management believes is more indicative of our on-going operating results and financial condition. Our management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance.
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