Big Lots updates shareholder return initiatives

Shares of Big Lots Inc (NYSE: BIG) slid nearly 5.0% on Friday morning after the discount retailer said supply chain constraints were to hit gross margin in the holiday quarter. The stock, however, recovered completely in a few hours as shareholders focused more on better-than-expected Q3 results.

What else was positive for the stock?

Shares also saw a boost after the Board of Directors authorised a new stock buyback programme and declared a quarterly dividend. Big Lots said it will repurchase $250 million worth of its outstanding common shares and declared 30 cents of cash dividend for the quarter.

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On top of that, the discount retailer also said that start of the holiday quarter was strong with record sales for the week of Thanksgiving and Black Friday.

Big Lots tanked sharply in the back half of 2021 when the highly contagious delta was the predominant variant in the United States. BIG is down close to 35% since early June.

Q3 financial performance

Big lots reported $4.3 million in net loss that translates to 14 cents per share. In the same quarter last year, it had posted $29.9 million in net income or 76 cents per share.

At $1.34 billion, sales were down 3.1%. According to FactSet, experts had forecast 16 cents of per-share loss on $1.32 billion in sales.

Future guidance and other notable figures

Other notable figures include a decline in gross margin from 40.5% to 38.9%. Comparable sales were down 4.7% versus 5.2% expected, as per the earnings press release.

For Q4, Big Lots forecasts up to $2.20 of EPS versus the FactSet consensus of $2.39. The U.S. company expects a 150 basis points hit to gross margin this quarter due to transportation costs. Its guidance for the full year was also weaker-than-expected.