By Sam Boughedda
Piper Sandler analysts downgraded shares of Big Lots (NYSE:BIG) to Underweight from Neutral, lowering the firm's price target on the stock to $7 from $12 per share in a note to clients Friday.
Analysts said the downgrade is based on Piper Sandler's industry view that demand for both home furnishings and mattresses has deteriorated since March and will likely remain challenged in the months ahead.
"Our March Mattress Retailer Survey published earlier this week, and our Q1 Furniture Retailer Survey published today both showed March sales deteriorated from prior months. Both surveys for Q1 came in weaker than expected, and for Q2 retailers in both survey expect sales to decline at a similar rate as Q1 (despite a much easier compare)," explained analysts.
"We expect significant pressure on sales while meaningful SG&A cuts at this point seem limited w/o jeopardizing future growth," analysts added. With the continued weakness in sales, Piper Sandler believes BIG FCF could go negative, thereby placing the dividend at risk.
"We reduce 2023 and 2024 sales and EPS to Street low, with 2023 EPS at ($6.38) vs the Street at ($4.50)," the analysts concluded.