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Big Lots preps for growth 

Columbus, Ohio – At closeout retailer Big Lots, the home business, considered one of its higher-margin categories, suffered lower sales and an unexpected increase in promotional markdowns, the 1,353-unit said during its fourth-quarter and yearend earnings call today.

Chairman and ceo Steve Fishman asserted that Big Lots is on the road to repairing this business, but offered few details on the process.

“Our home business remained soft,” Fishman said. “We’re working hard to correct the situation, and make changes in both product and people to try to get this category back into positive territory.”

For the year ended Feb. 2, Big Lots recorded net profit of $158.5 million, up 27.8% from 2006. Sales in 2007 were down 1.8% to $4.7 billion. Comp sales grew 2.0%, the company said.

Highlights for the year and quarter included consumables and seasonal – both departments posted comp store sales in mid-single digits or better.

Taking a detour downward during the fourth quarter – when it “slowed a bit” – was the furniture category, which has enjoyed nearly three-and-a-half years of consecutive mid-single and low-double digit comp-store sales.

But already in February and this month furniture sales have “rebounded strongly,” giving hope that category’s soft performance in the fourth quarter “will prove to be an isolated event,” Fishman said.

Strategic initiatives for 2008 include additional store retro-fits. Big Lots had identified about 40 units that will be adjusted to accommodate more merchandise on the selling floor in certain smaller square-footage stores. All retro-fitted stores will emphasize consumables on the floor plan and will include a full furniture department, Fishman said.

Another ’08 strategic initiative is ramped up real estate growth. Big Lots plans to open 20 new units in 2008. In 2007 it opened seven and in 2006 it opened 11 stores. “We believe our organization is operating more efficiently that it ever has,” he said. “So, to be able to leverage those efficiencies over a larger store base would be a big positive for our business.”

Media shifts are also in line; the retailer will up its TV and internet advertising to 45% up from 40%, and reduce print ads to 55% from 60%. Spurring the change is the surge in online membership for Big Lots’ “Buzz Club” e-mail alerts about new products and discounts to registered customers. Membership has soared to more than two million, up from Christmas 2006 when the club had only 800 members.

Big Lots projects 2008 earnings from continuing operations of $1.70 to $1.80 per diluted share, vs. the $1.41 mark attained in 2007.

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