Big Lots To Live Down Closeout Image

August 31, 2014

Improved merchandising strategies and marketing execution at Big Lots has president and CEO David Campisi feeling good about prospects for a company that continues to distance itself from its closeout roots.

Big Lots produced a 1.7% same store sales increase during its second quarter ended August 2 and generated earnings per share of 31 cents, a penny higher than the company's forecast range of 24 cents to 30 cents.  Total sales increased 1.2% to $1.2 billion.  Profits from continuing operations declined to $17.2 million from $21.5 million and earnings per share of 31 cents were also below the prior year's 37 cents.  Profits suffered as expenses increased 34.5% of second quarter sales compared to 33.9% in the second quarter the prior year.  Gross margins were flat at 39.3%.  Inventories at U.S. stores declined by 6%.

The top line performance was modest and the better than expected profits were below the prior year, but Campisi said he was very pleased with the results with five of the company's seven merchandise categories posting positive comps.

"For the second consecutive quarter, our comps were positive and comfortable within the guidance range we provided, and our earnings were above the high end of our range.  We believe this is an indication that our core customer is responding to our improved merchandising strategies and marketing execution."

Those strategies include a shift toward cleaner, more orderly merchandised stores with a reliably available assortment of products in categories such as food and consumables where leading national brands are available.  The company expects to have freezers and coolers in roughly half of its stores by the holidays and is also enjoying success with the furniture category where it offers financing.

It's all part of an effort to distance itself from the negative image the company had created for itself as a retailer who sold closeout merchandise in cluttered stores.  In fact, in a subtle shift evident in the second quarter, Big Lots now describes its 1,495 store operation as a "unique, non-traditional, discount retailer," whereas it had previously characterized itself as "America's largest broadline closeout retailer."

The result of the changes is more suppliers of branded merchandise are interested in doing business with the company and tapping into the growth potential of its nearly 1,500 stores.  According to CFO Tim Johnson, the company has streamlined its supplier base and is attracting more interest from major suppliers who are no longer embarrassed to see their products in Big Lots stores.

Source: Retailing Today