Big Lots Stock Requires After a Q1 Loss Surprise As Inflation and Gas Price Surge Increase Spending

Big Lots Stock Requires After a Q1 Loss Surprise As Inflation and Gas Price Surge Increase Spending ...

Updated at 9:50 AM EST

Get Big Lots, Inc. Reportshares suffered a profound first quarter loss as a result of the "significant" cost and margin pressures caused by the highest rate in over forty years in the United States.

Big Lots said it lost $11.1 million, or 39 cents per share, over the three months ended in April, a tally that dropped from a profit of $2.62 per share over the same period last year and missed Street forecasts by $1.29. Group sales, according to Big Lots, fell 3.4 percent from last year to $1.37 billion, the highest level ever.

Big Lots declined to provide earnings guidance for the current quarter, but noted that promotional activity will likely cut gross margins into the low 30 percent range. Cost reduction and supply-chain improvements should boost margins over the back half of the year, according to the firm.

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"We believe the slowdown is mainly driven by higher gas prices and increased inflation, which is affecting discretionary purchases across the retail industry," says CEO Bruce Thorn. "As a result, we missed our sales estimate by about $100 million in April, while supply chain impacts across gross margin and SG&A continued to be significant headwinds," said CEO Boe Thorn. "We anticipate the environment to remain difficult and we remain highly focused on controlling the business cautiously over the course of Q2.

"We are focusing on opening price points that increase traffic and gross margin rates through profiting from extensive close-out opportunities, more targeted pricing and promotions, reducing supply chain charges and reducing shrinking."

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Big Lots'' stock was only 1.5 percent down in early trading, with $26.43 per share, which has extended its year-to-date decrease to around 44%.

According to AAA statistics, gasoline prices have reached a new high this week as oil prices have risen in response to Russia''s invasion of Ukraine and OPEC''s unwillingness to boost its collective production.

Inflation in the United States slowed modestly from the highest level in four decades last month, but core consumer price pressures remained to rise, suggesting a longer-than-expected increase in the world''s largest economy.

So-called core inflation, which excludes volatile components such as food and energy prices, increased 0.5 percent on the month, and 6.6 percent on the year, reaching the highest level since February 1991.

Inflation, input cost constraints, and supply chain snarls have taken their toll on the US retail sector this quarter, resulting in disappointing first quarter earnings and predictions from Walmart (WMT) - Get Walmart Inc. Report, Target (TGT) - Get Target Corporation Reportand Amazon (AMZN) - Get Amazon.com, Inc. Reportthis month.

So far this quarter, the S&P 500 retailing group has dropped by 23.67%, despite its worst performance since 1990, as investors anticipate further pain from the Fed''s rate-based inflation fight and the highest nominal domestic gas prices on record, which continue to dangle household budgets and discretionary spending.

Retail sales in the United States increased in April, according to the Commerce Department earlier this week, as record high gas prices and rising inflation failed to discourage spending in the world''s largest economy.

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