Big Lots plunges 12% as high gas prices and inflation squeezes customers, leading to unexpected quarterly loss

• Big Lots shares slid Friday after the company posted a decline in quarterly sales and unexpectedly swung to a loss.
• The retailer said its customers were feeling the pressure of higher gas prices and broader inflation.

Big Lots shares sharply dropped Friday after the general merchandise retailer unexpectedly swung to a quarterly loss, with the company saying its customers were feeling the pain of high gas prices.

The retailer, which runs more than 1,400 stores in 47 states, also said first-quarter sales dropped 15% to $1.37 billion, which missed the FactSet consensus estimate of $1.46 billion.

Shares of Big Lots dropped 12% to $26.82 Friday morning. The stock in premarket trade fell by as much as 25%.

Comparable sales growth began to slow in April after solid starts in February and March, prompting the company to increase price markdowns.

"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," Big Lots CEO Bruce Thorn said in the earnings report.

Gas prices have been climbing after oil prices rocketed higher following Russia's invasion of Ukraine in late February. The average US price of regular gas was $4.60 a gallon this week, according to motor club AAA. Gas prices could soar to $6 a gallon this summer, JPMorgan recently warned.

Comparable sales fell 17% during the quarter. A year earlier, they rose 11.3%. Inventory spiked up 48.5% on higher unit costs and a significant increase in in-transit inventory, it said.

Big Lots swung to a first-quarter loss of $0.39 a share, confounding expectations of a profit of $0.95 a share in a FactSet survey of analysts.

"We have reacted quickly to the changes in consumer demand by increasing value offerings to our customers," said 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."

Big Lots' report follows downbeat financial results from Target and Walmart, among other retailers. Upscale retailer Nordstrom, however, this week raised its profit guidance for the full year.