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April 9, 2020, 10:11 a.m. EDT

Big Lots shares soar 29% after $550 million sale and leaseback agreements, stock upgrade

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By Tonya Garcia

Big Lots Inc. /zigman2/quotes/202923245/composite BIG +5.64% shares soared 29.4% in Thursday trading after the retailer announced sale and leaseback agreements that will yield net proceeds of $550 million after taxes and expenses and the stock was upgraded at JPMorgan. The transaction with Oak Street Real Estate Capital, LLC involves distribution centers in Columbus, OH, Durant, OK, Montgomery, AL, and Tremont, PA. The transaction is expected to close in the fiscal second quarter. Big Lots will use the proceeds to fully pay down debt on its revolving credit facility and provide additional liquidity. The company said it could also use some of the proceeds for share buybacks and growth efforts once the markets normalize. JPMorgan moved Big Lots shares to neutral from underweight and raised its price target to $21 from $14. After a conversation with management, analysts estimate there will be about $250 million left after debts are paid. JPMorgan also thinks that Big Lots customers, which have an average income in the range of $70,000 to $75,000, will be well positioned after receiving government stimulus checks from the CARES Act and will take advantage of the retailer's value proposition in areas like furniture. Despite the news, two investor groups, Macellum Advisors GP, LLC and Ancora Advisors, LLC say "shareholders should not look at this transaction as evidence that the board is now functioning well," and the company wouldn't have entered into the deal if not for the threat of a proxy contest. "The investor group further believes that there remains roughly $427 million (approx. $11 per share) more in real estate value that can also be monetized, which the Company has not disclosed to shareholders," the statement says. These investors think the board should not be in charge of the proceeds after the deal closes "given its poor track record of capital allocation" and that the board is in need of a "refresh." The group says it has nominated nine board members. Big Lots stock has slumped 47.2% over the past year while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.48% has fallen 2.4% for the period.

/zigman2/quotes/202923245/composite
US : U.S.: NYSE
$ 38.75
+2.07 +5.64%
Volume: 13.52M
May 29, 2020 3:59p
P/E Ratio
5.49
Dividend Yield
3.10%
Market Cap
$1.52 billion
Rev. per Employee
$150,520
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/zigman2/quotes/210599714/realtime
US : S&P US
3,044.31
+14.58 +0.48%
Volume: 4.38B
May 29, 2020 5:14p
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