Big Lots Focused on Showing Bigger Difference

Columbus, Ohio — Looking to further differentiate itself from traditional retailers, Big Lots Inc., is refocusing its merchandise mix with a broader breadth of closeout items, the company said during its third quarter earnings call.

By next year, the company expects to raise closeout offerings to 60 percent of its total mix, up from 50 percent today, said Michael Potter, chairman and CEO.

“Our most important focus now is our merchandise content. Before, we swung it too close to traditional retail,” he said. “We're now going after more unique closeouts and brand-name closeouts. Our buyers across all merchandise categories are more focused on prioritizing closeout deals.”

Potter added that the company is “taking our open-to-buy management to a different degree, more tangibly calculating and restricting buying of non-closeout to increase closeouts department by department.”

Over the third quarter, the company said it was challenged by a soft economy and escalating prices in gas and commodity goods, which directly affect the store's lower- to middle-income customer base. Traffic slowed during the period, but was partially offset by positive average basket trends, which Potter said resulted from “continuing improvement in our home decorative business and the introduction of furniture in our West Coast stores.”

Big Lots experienced sales improvements in several categories, namely home décor, which includes tabletop and frames, as well as stationery and hard-lines. Its expansion of furniture stores in the Western region also proved successful, Potter said.

Below expectations and last year's numbers were discretionary sales of seasonal merchandise and toys, a trend the retailer expects will be further magnified this fall.

In preparation for the holiday selling season and inline with its new strategy to enhance closeout offerings, Big Lots is revamping its holiday offerings to include mainly trees and outdoor decorative items and lighting — categories the company said pose less of a markdown and inventory clog risk post-season versus decorative items, like angels and ornaments.

“We've put more of our buying into what sells from late November to mid-December,” Potter explained. “Before, we'd have 60 to 80 feet of decorative products, but they were a big liability and didn't sell well. We believe our holiday decorative selection now has been improved with more basic and less fashion.”

This new move, Potter added, puts the company is a stronger post-holiday position.

“We're in a better position to transition from holiday to early spring,” he said.

For the fourth quarter, comparable store sales remain on previous guidance at flat to 4 percent higher, and December comps are expected to increase in the low to mid single digit range. November comps are trending below plans.

For January, comps are expected to increase in the mid single digits against slightly negative comps the previous year.