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Big Lots Stock Crumbles After Surprise Q1 Loss As Inflation, Gas Price Surge Bites Spending

"We believe the slowdown was caused by the spending pressure our consumers felt from higher gas prices and broader inflation," said CEO Bruce Thorn.

Updated at 9:50 am EST

Big Lots  (BIG) - Get Big Lots Inc. Report shares plunged lower Friday after the discount retailer posted a surprise first quarter loss amid what it called "significant" cost and margin pressures brought by the fastest U.S. inflation in more than forty years.

Big Lots said it lost $11.1 million, or 39 cents per share, over the three months ending in April, a tally that swung from a profit of $2.62 per share over the same period last year and missed Street forecasts by $1.29. Group sales, Big Lots said, fell 15.4% from last year to $1.37 billion, again shot of analysts' estimates of a $1.46 billion tally.

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

"We believe the slowdown was caused by the spending pressure our consumers felt from higher gas prices and broader inflation, which is affecting discretionary purchases across the retail industry," said CEO Bruce Thorn. "As a result, we missed our sales plan by approximately $100 million, the vast majority in April, while supply chain impacts across gross margin and SG&A continued to be significant headwinds."," said CEO Bruce Thorn. "We expect the environment to remain challenging and we remain highly focused on managing the business prudently, which includes aggressively right-sizing our inventories over the course of Q2."

"We are focused on opening price points that drive traffic and improving gross margin rates through capitalizing on significant close-out opportunities, more targeted pricing and promotions, minimizing supply chain charges, and reducing shrink," he added.  

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Big Lots shares were marked 13.5% lower in early trading to change hands at $26.43 each, extending its year-to-date decline to around 44%. 

Gasoline prices hit a record high national average of $4.60 this week, according to AAA data, as oil prices surged in the wake of Russia's invasion of Ukraine and OPEC's reluctance to boost its collective production.

U.S. inflation eased modestly from the fastest pace in four decades last month, but core consumer price pressures continued to bubble higher, suggesting a longer-than-expected run of elevated readings in the world's biggest economy.

So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.6% on the month, and 6.2% on the year, near the highest since February of 1991.

Inflation, input cost pressures and supply chain snarls have taken their toll on the U.S. retail sector this quarter, culminating in disappointing first quarter earnings and outlooks from giants Walmart  (WMT) - Get Walmart Inc. Report, Target  (TGT) - Get Target Corporation Report and Amazon  (AMZN) - Get Amazon.com Inc. Report this month.

The S&P 500 Retailing Group is down around 23.67% so far this quarter, its worst performance since 1990, as investors expect more pain to come from both the Fed's rate-based inflation fight and the highest nominal domestic gas prices on record, which continue to pinch household budgets and discretionary spending.

U.S. retail sales growth steadied in April, data from the Commerce Department indicated earlier this week, as record high gas prices and surging inflation failed to deter spending in the world's biggest economy.