Bulls Charge Into Long Weekend

Big Lots is throwing it back to the 1990s with its share price. The downside move comes after the discount furniture retailer posted losses that nearly doubled analyst estimates. 😮

Here’s how its primary metrics shook out vs. expectations:

• Adjusted loss per share of $3.40 vs. $1.78
• Revenues of $1.12 billion vs. $1.19 billion
• Same-store sales decline of 18.3% vs. 13.2%

The lower-income consumer, which makes up most of the company’s customer base, continues to face several challenges: inflation biting into their discretionary income, receiving lower tax refunds, and higher interest rates on larger purchases. These factors and overall economic uncertainty caused many customers to pull back spending. 🛑

Adding to the issues were furniture product shortages, particularly as the company’s largest vendor abruptly closed in November. Unfavorable weather conditions also hurt seasonal lawn and garden sales, though hopefully, some of that will be made up in the current quarter.

To entice consumers, the company increased promotional activity, which pushed its gross margin from 36.7% last year to 34.9% today. Also, the value of the inventories on its books fell by 18.8%. 🔻

The company’s current situation is dire, and executives are aware of that. So to avoid becoming the next Bed Bath & Beyond story, they’re taking drastic measures to preserve the liquidity they’ll need to get their core business back on track.

That starts with suspending the company’s dividend and monetizing assets worth roughly $340 million. Additionally, they’ve raised their 2023 cost-cutting target from $70 million to over $100 million and identified opportunities to cut more than $200 million over the next eighteen months. ❌

Executives opted not to provide full-year guidance, citing the “significant macroeconomic uncertainty,” but said they expect sales and gross margins to improve in the year’s second half. That’s similar to comments from other retailers like Best Buy. However, they forecasted a same-store sales decline in the “high-teens” percentage range for the second quarter. That was well beyond the analyst consensus view of an 8.6% decline. 🔮

In the face of all these issues, executives say they’re “highly encouraged by the green shots we are seeing.” Moreover, they reiterated that the steps being taken today would position them well for when the macroeconomic environment ultimately turns more favorable.

However, much like the company’s customers, investors aren’t quite buying what they’re selling. The only shoots they see are the parachutes they’re jumping out of the stock with. 🪂

Bad jokes aside, $BIG shares fell 13% to their lowest level since 1991. 👎

Pinduoduo, now known as PDD Holdings, is rebounding from nearly seven-month lows following better-than-expected results. 👍

The company’s adjusted earnings per American depository share (ADS) of RMB6.92 was well above the RMB4.46 expected. Its gross margin also improved from 69.9% to 70.4%.

Meanwhile, revenues grew 58.1% YOY to RMB37.64 billion, topping the consensus view of RMB32.18 billion. That’s broken down into online marketing services of RMB27.24 billion (+50% YoY) and transaction services of RMB5.59 billion (+86% YoY). 💰

Executives say their cost-cutting efforts and operational prioritization have been paying dividends. Additionally, recovery trends among consumers continue to improve, with online retail picking up steam and users showing a higher willingness to shop. Overall, these early trends should lay a “solid foundation” for steady consumption growth throughout the year. 🛒

To position itself to benefit from this improvement, it’s investing heavily in promoting ecosystem vibrancy and sustainability. Its dedicated ’10 Billion Ecosystem Initiative’ is designed to facilitate an environment where quality merchants can flourish. In addition, improving cash flows and operating profitability should also extend the company’s runway for investing in its growth goals.

Despite today’s 19% rally, $PDD shares are roughly 65% off their 2021 highs. Nonetheless, investors seem hopeful that the company’s efforts will continue to push the stock in the right direction. 🔺

While discussing Chinese stocks, it’s worth mentioning Canaan Inc. The China-based computer hardware manufacturer is plunging after reporting weak results. 😮

The computing solutions provider reported an adjusted net loss of $3.37 per share. Last year it reported a $2.52 per share profit. Revenues also dropped from $201.8 million to $55.2 million, missing the consensus view of $62.4 million.

Executives blamed an industry-wide reduction in selling prices. They also noted unforeseen delays in payments and shipments following U.S. regional bank failures. However, investors remain skeptical of that reasoning given the company’s many quarters of underperformance. They want fewer excuses and more results. 😑

$CAN shares were down another 27% today, approaching their all-time lows.