Big Lots To Have Weak Q4 Results Given Current Consumer Spending Trend, Says Analyst

Telsey Advisory Group analyst Joseph Feldman reiterated a Market Perform rating on the shares of Big Lots Inc BIG and lowered the price target from $20 to $16.
The analyst expects weak 4Q22 results, reflecting a softer consumer spending environment, particularly related to big ticket and discretionary products, such as furniture.
Furthermore, higher promotions, markdowns, and elevated operating costs are likely to pressure near-term performance, added the analyst.
The analyst expects many of the headwinds to continue in 2023.
The analyst expects to see sequential improvement in the business given the lapping of negative comps for two-years and significant adjusted operating margin compression of 1,070 basis points as well as some gains from initiatives related to merchandising, supply chain, and operations.
In the analyst's view, Big Lots' strategy is clouded, especially around new stores, remodels, operations, and profits, with the burden of proof on the management team to revive the business.
In the near-term, the analyst believes the tough macro environment should continue to mask some progress on its Operation North Star strategy, merchandising productivity, e-commerce, loyalty, optimization of margins, and enhancement to the supply chain infrastructure.
The analyst expects an additional update on the closing of 50 unprofitable and less productive stores in 2022, as well as thoughts on the small/rural market new store opening strategy.
The analyst also expects additional color on other key pointers like asset monetization, merchandising, plans to improve profits and dividend payout.
Price Action: BIG shares are trading higher by 0.62% at $14.56 on the last check Tuesday.

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