Shares of discount retailer Big Lots tumbled Thursday after the company reported first-quarter sales declines that were steeper than anticipated.
The Columbus, Ohio-based company, which operates more than 1,300 stores in 48 states, reported a net loss of $205 million for the 13-week quarter, which ended on May 4, vs. a loss of $206.1 million in the year-ago first quarter. Sales for the quarter were down 10.2%, to $1 billion, driven by a comparable-store sales decrease of 9.9%.
Big Lots previously had forecasted comp-store sales declines in the mid-single digits.
In a conference call with analysts, the company said weak consumer spending on hard goods such as furniture was largely to blame for the sales shortfall. It also said it plans to continue to expand its grocery offering and to be highly aggressive on price in its food and consumables categories.
“We’ve seen transactions improve with extreme bargains … such as in the grocery category, where the SKU count has grown and where we’re leveraging more everyday low pricing in our assortment,” said Bruce Thorn, president and CEO.
As an example, Thorn cited a partnership between Big Lots and a national beverage vendor to launch an everyday low-price program that was priced at or better than the prices offered by low-price competitors. The effort has driven positive comp-sales growth in beverages since then, he said.
However, Thorn said food and consumables comps decelerated sequentially from Q4 on a year-over-year basis, which he attributed to aggressive pricing by competitors in Q1.
“In response, we are focused on accelerating the penetration of extreme bargains, particularly in the food category, with more breadth and less depth,” he said.
By offering more choices of these items but limited supply, the company is seeking to drive more frequent customer visits as consumers look for deals while supplies last. This creates “a more robust extreme bargain treasure hunt experience,” Thorn said.
He noted that throughout the store, including in food and consumables, the company’s category buyers are focusing on closeout deals from suppliers that will enable the company to increase the proportion of its products offered at sharply reduced prices.
The company expanded its grocery SKU count by 150% in Q1 and increased its extreme value SKU count in personal care sevenfold, he said. He also said the pet category was a standout performer in Q1, with positive comps after the company expanded its assortment of those products last fall.
Thorn described the food and consumables categories, along with everyday essentials, as the “fiercest battleground” for the company, as competitors have reduced prices.
He said the company’s core customers — lower-income consumers — were under more financial pressure than Big Lots expected in Q1 as interest rates, credit card balances, and inflation all remained high.
Thorn also predicted that the company’s performance would improve later in the year, as it remains focused on five key actions, which are to “own” bargains; to communicate unmistakable value; to increase store relevance; to win customers for life with its omnichannel efforts; and to drive productivity.