Telsey: Big Lots’ Turnaround Will Take Time Amid Challenging Economic Environment
December 13, 2023
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The company is in the midst of a turnaround effort, but the challenging economic environment will make it difficult to achieve the desired results in a timely manner. The current macro environment is making it extremely difficult for retailers. With consumers having less money to spend, shoppers are looking for the best value when they do decide to purchase something, meaning Big Lots ($NYSE:BIG) will have to compete harder for their customers.
Additionally, with low employment rates, wage growth has been sluggish, meaning that any potential sales increases will be hard won. On top of the macroeconomic headwinds, Big Lots is also facing increased competition from dollar stores and other discount retailers. As such, Big Lots has had to discount more heavily in order to remain competitive in the market. This can be damaging to their profit margins, and so they have to be careful not to go too far in order to remain profitable. It is clear that Big Lots’ turnaround will take some time due to the challenging economic environment. They will need to find ways to remain competitive in the market without sacrificing too much on margins in order to succeed in their turnaround efforts.
Price History
On Tuesday, BIG LOTS stock opened at $6.4 and closed at $6.4, down by 0.3% from prior closing price of 6.4. This downward trend reflects the challenging economic environment that Big Lots is operating in as it works to turn around business operations. Unfortunately, this turnaround is likely to take some time, since the company is operating in an environment of slow consumer spending due to the pandemic and economic uncertainty. As a result, Big Lots has been forced to reduce prices in order to remain competitive, which has significantly impacted margins.
Additionally, Big Lots’ efforts to reposition their stores and launch new initiatives have been hindered by the pandemic and resulting restrictions, further exacerbating the situation. While Big Lots has made some progress in recent quarters, the current environment is making it difficult for the company to achieve desired results in the short term. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Big Lots. More…
| Total Revenues | Net Income | Net Margin |
| 4.83k | -463.63 | -13.1% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Big Lots. More…
| Operations | Investing | Financing |
| -264.38 | 310.23 | -61.4 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Big Lots. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 3.63k | 3.31k | 10.48 |
Key Ratios Snapshot
Some of the financial key ratios for Big Lots are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| -7.3% | 3.1% | -7.7% |
| FCF Margin | ROE | ROA |
| -6.1% | -75.9% | -6.4% |
Analysis
At GoodWhale, we conduct fundamental analysis to evaluate companies and identify the type of investments that would best fit a particular investor. After conducting our analysis on BIG LOTS, our Star Chart concluded that the company is strong in asset and dividend, medium in profitability, and weak in growth. Based on these results, we classify BIG LOTS as a “cow” company, which has a history of paying out consistent and sustainable dividends. This means that investors looking for companies that have low volatility and consistent income would likely be interested in BIG LOTS. Additionally, BIG LOTS has scored an intermediate health score of 5/10 considering its cashflows and debt, making it less risky than other stocks and likely to safely ride out any crisis without the risk of bankruptcy. More…
Peers
Big Lots Inc is an American retail company that competes with other discount retailers such as B&M European Value Retail SA, Dollar General Corp, and Target Corp. Big Lots offers a variety of merchandise including furniture, seasonal items, grocery, and home decor. The company operates over 1,400 stores in 47 states.
– B&M European Value Retail SA ($LSE:BME)
B&M European Value Retail SA is a holding company that operates through its subsidiaries. The company is engaged in the retail sector and operates stores under the following banners: B&M, Heron Foods, Dealz, and Jawol. The company was founded in 1978 and is headquartered in London, United Kingdom.
– Dollar General Corp ($NYSE:DG)
Dollar General Corporation is an American chain of variety stores headquartered in Goodlettsville, Tennessee. As of February 2020, Dollar General operated 16,368 stores in the continental United States. The company offers a selection of merchandise, including consumables, seasonal, home goods, and apparel.
– Target Corp ($NYSE:TGT)
Target is one of the largest discount retailers in the United States. The company offers a wide variety of merchandise, including apparel, home goods, electronics, and more. Target is known for its competitive prices and its commitment to customer satisfaction. The company has a market cap of 74.48B as of 2022 and a return on equity of 34.09%. Target is a publicly traded company and its shares are traded on the New York Stock Exchange.
Summary
Investing analysis on BIG LOTS reveals that its turnaround may take a longer time due to challenging macroeconomic conditions. According to Telsey Advisory Group, the company’s current weak performance is driven primarily by the slowdown in consumer spending, and macroeconomic factors are likely to remain a headwind in the near future. As a result, investors need to be patient and maintain a long-term outlook before expecting any significant returns. In the meantime, Big Lots‘ management team is making efforts to improve sales by launching new products, expanding its presence in the online retail market, and focusing on cost optimization.
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