Loop Capital maintains sell rating on Big Lots stock

On Monday, Loop Capital affirmed its sell rating on shares of Big Lots (NYSE:BIG), maintaining a price target of $1.00. The firm's stance comes following a report late last week by The New York Post, which indicated that Big Lots is considering store closures this year and may be facing bankruptcy.

The report aligns with Loop Capital's cautious perspective on the retailer's future. According to the firm, the potential for a bankruptcy filing by Big Lots could further discourage consumer spending at the retailer's locations, potentially exacerbating the company's financial challenges.

The statement from Loop Capital highlights the risk of a downward spiral where consumer worries about Big Lots' viability lead to decreased patronage, which in turn could hasten the company's financial decline. This scenario, Loop Capital suggests, might contribute to the realization of the very outcome customers fear—a bankruptcy declaration.

Big Lots has not publicly confirmed the store closures or the possibility of filing for bankruptcy. Nevertheless, the news has influenced Loop Capital's outlook, prompting the firm to restate its low price target for the company's stock.

In other recent news, Big Lots experienced a reduction in its price target following disappointing first-quarter results in 2024, with an adjusted EPS of ($4.51) and a decrease in comparable store sales by 9.9%.

Telsey Advisory Group maintained its Market Perform rating for Big Lots, acknowledging improvements in merchandise offerings, inventory management, and cost savings within the company. The firm's cautious outlook reflects the challenging economic landscape affecting Big Lots' core demographic of lower to middle-income consumers.

Despite these challenges, Big Lots saw positive developments in the pet and toy segments, with a positive comparable sales performance in the first quarter. Operational initiatives and cost reductions led to improvements in gross margin rate and operating expenses.

The company is enhancing liquidity with a new $200 million term loan facility, expanding vendor relationships for more closeout deals, and improving online presence and store relevance.

Big Lots revised its second-quarter guidance downward, anticipating a high single-digit to mid-single-digit percentage decrease in comparable store sales. However, the company observed a sequential improvement in comparable store sales in May and June, with expectations for this trend to continue throughout 2024.

InvestingPro Insights

As Big Lots (NYSE:BIG) faces the specter of store closures and potential bankruptcy, recent InvestingPro data and tips provide a more in-depth look at the company's financial health. With a market capitalization of just $41.91 million and a negative P/E ratio reflecting losses, the retailer's challenges are quantifiable. The revenue decline of -11.68% over the last twelve months as of Q1 2025 underscores the concerns raised by Loop Capital. Additionally, the stock's price has plummeted, trading near its 52-week low, which aligns with the 13.43% price percentage of its 52-week high, revealing a stark downturn in investor sentiment.

InvestingPro Tips also highlight critical issues for investors to consider. Big Lots operates with a significant debt burden and may have trouble making interest payments on its debt, which could be a factor in the potential store closures and bankruptcy considerations. Moreover, the stock has taken a significant hit over the last week, with analysts revising their earnings downwards for the upcoming period and anticipating a sales decline in the current year.

For a deeper analysis and additional insights, investors can explore more InvestingPro Tips for Big Lots at https://www.investing.com/pro/BIG. There are 21 additional tips available, which can help investors gauge the company's prospects and make informed decisions. Readers of this article can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a valuable resource for those tracking the unfolding situation at Big Lots.

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