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Big Lots Home a Leader in Q4

For the second consecutive quarter, home was “a leading category in the store” at Big Lots, the closeout chain reported during its fourth quarter and year end earnings call last week.

“Newness and better quality goods were again a successful formula,” said Steve Fishman, chairman, president and ceo. “Real good closeout deals from new vendors and better brands resonated with the consumer.”

The home business as well as furniture and hardlines together “led the way” for the quarter, with comps up in the high single digits, followed by seasonal, toys and consumables comping in the low to mid single digits.

Big Lots is “very encouraged by the accelerating trends in furniture during Q4, as new items and new styles in upholstery and case goods were well received by the customer,” Fishman continued. “Additionally, our mattress business got healthy in Q4 and comped up in line with the rest of the division.”

The quarter also saw a surge in membership in the retailer’s Buzz Club Rewards program. As of late February, Big Lots’ Buzz Club had attracted more than 1.4 million members, “exceeding our expectations,” said Fishman, adding that the retailer has detected recent trends “that suggest [Buzz Club] Rewards can be a basket driver, and Rewards members spend nearly double what the average customer spends.”

The fourth quarter overall proved “a wonderful example of a solid execution of a plan that was months in the making … From a stores perspective, it was the best executed holiday season I’ve seen in this business,” he said.

For the fourth quarter ended Jan. 30, total sales increased 7.0% to $1.46 billion. Sales were driven by strong comparable store sales results, which for stores open at least two years at the beginning of the fiscal year rose 5.1% — Big Lots’ largest Q4 comp increase in 10 years.

Net income was $105 million, or $1.29 per share, up 33% from $79 million, or 97 cents per share in the year-ago quarter.

For the full fiscal year, sales grew 1.75% to $4.7 billion, with a comp increase of 0.7%.

Net income was $200 million, or $2.42 per share, up 31% to $152 million, or $1.85 in the previous year.

Big Lots’ outlook for the 2010 first quarter calls for a comparable store sales increase of 4% to 6%, and income from continuing operations in the range of 60 to 65 cents per share, compared to income from continuing operations of 44 cents per share for the first quarter of fiscal 2009.

For the full fiscal year, Big Lots anticipates income from continuing operations to range from $2.65 to $2.75 per share vs. adjusted (non-GAAP) income from continuing operations of $2.37 per share in fiscal 2009. Comps are expected to increase 3% to 4%.

“Heading into 2010, we are confident in our plans for continued operating margin expansion, EPS growth, and strong cash flow to drive shareholder value. We see opportunities for robust top-line performance through more consistent comp sales and increasing our store growth plans,” Fishman said.

Big Lots also offered some outlook for the coming three years, including: a compounded EPS growth rate of 12% to 16%; operating profit rate of approximately 8% by fiscal 2012; EBITDA of $525 to $550 million by fiscal 2012; cumulative cash flow of approximately $650 to $700 million; and an estimated total of 1,500 stores by end of fiscal 2012.


New Big Lots Units Target More Affluent Areas

Columbus, Ohio — Big Lots, which currently operates 1,361 units in 47 states, plans to open 80 new units this year and will close up to 40 locations for net store growth of 40 stores, or approximately 3%.

The company sees “a meaningful opportunity” for growth at its “A” locations — stores in higher-income neighborhoods — and estimates opening about 30 such new sites this year.

“This is a major step forward for our company and has been made possible by the softening of the commercial real estate market and the strength of our improving performance over the last several years,” said Chuck Haubiel, legal and real estate senior vp during the company’s quarterly conference call.

He added that higher quality and more branded merchandise assortments along with improvements in store standards and customer service “have given us the confidence that we can be successful in these better locations where the new customer base has a somewhat higher level of expectations in terms of the in-store shopping experience.”

Last year’s test of eight “A” store exceeded initial sales goals by 10% to 15% and are trending to sales of a little over $4 million per store, about $190 per foot for their first full year, he said.

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