Big Lots’ stock tumbles, as Wall Street’s top bear sees more than 80% downside

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Shares of Big Lots Inc. were in danger of having their worst day in four years on Monday, after Loop Capital warned investors away from the discount home essentials retailer, citing a “precarious” financial situation and loss of relevance with consumers.

The stock

sank 14.7% in premarket trading, which puts it on track for the biggest one-day selloff since it tumbled 19.5% on March 18, 2020, which was a week after the World Health Organization declared COVID-19 a pandemic.

The selloff comes even after the company said before Monday’s opening that fiscal fourth-quarter same-store sales, gross margin, operating expenses and inventory were in line with guidance provided in late November.

“In addition, we generated substantial cash flow in the quarter, which was used to pay down debt on our $900 million asset-based lending facility,” Chief Executive Bruce Thorn said.

The company said it will report full results on March 7.

Loop Capital’s Anthony Chukumba became Wall Street’s biggest bear on Big Lots’ stock, as he cut his rating to sell from hold, and slashed his price target to $1 from $6.

The new target implied 81% downside from Friday’s closing price of $5.36, and was below the stock’s record-low close of $1.20 on Feb. 23, 1990.

“We believe Big Lots has lost substantial consumer relevance and mindshare, which in our long experience is very difficult — if not impossible — to regain,” Chukumba wrote on a note to clients.

He said he was “skeptical” of the company’s merchandising shift back to bargain and treasure hunting, given changes in the competitive landscape over the past decade.

“Finally, we think Big Lots’ financial situation is becoming increasingly precarious and find recent media reports the company has hired a turnaround consulting firm and is currently exploring financing options to be very concerning,” Chukumba wrote.

Through Friday, the stock had plunged 31.2% amid a six-week losing streak, which would be the longest such streak since the seven-week stretch that ended June 7, 2019.

Over the past 12 months, the stock has plummeted 67.3% while the S&P 500 index
has rallied 22.9%.

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