Big Lots' Home Business Strong in Third Quarter
December 7, 2009-- Home Textiles Today,
Big Lots' home business — specifically new programs of towels, sheets and rugs — took center stage during the closeout chain's third quarter, posting the "biggest sales trend improvement" during the period.
"Newness and better-quality goods [were] the formula to the success in Q3 as we posted a low single digit comp increase aided by great closeout deals from new vendors," said Steve Fishman, chairman, president and ceo. "We also had good results with better brands in our tabletop and food prep areas, and I was pleased with the higher quality merchandise we offered in our new towel, sheet and rug programs. The customer response has been positive."
But "just as important," he added is that "the trends in these categories from Q3 have spilled over into Q4, and home is actually one of our best performing categories, quarter to date, for the holiday period."
Home also was credited with the company's improved gross margin rate, noted Joe Cooper, svp, cfo.
"Our Q3 gross margin rate was better than our guidance of flat-to-slightly up, primarily due to better-than-anticipated IMU in import freight cost as well as a lower rate of merchandise mix impact due to the resurgence of sales in our home business," he said.
For the quarter, ended October 31, net income from continuing operations for the quarter came in at $30.3 million, or 37 per diluted share, nearly triple year-ago profit of $12.4 million, or 15 cents per share. The results included $8.2 million from a real estate sale.
Sales rose 1.3% to $1.04 billion, compared to $1.02 billion for the same period last year. Comparable store sales for stores open at least two years at the beginning of the fiscal year fell 0.2% for the quarter.
"Over the last 12 months, the consumer has become increasingly value conscious, which is good for Big Lots, but also has them being very stingy on their discretionary purchases," said Fishman. "This has made it more difficult for us to drive top line performance, since nearly 70% of our merchandise assortment is somewhat discretionary in nature."
Year to date, net income from continuing operations totaled $95.2 million, or $1.15 per diluted share, up 30.5% from to $73.0 million, or 89 cents per diluted share, for the same period a year ago.
Sales fell back a 0.5% to $3.26 billion, decline from $3.28 billion in the same period last year. Comp for the 39-week period were not supplied.
With store growth being "the principal priority for this executive team," Fishman said, real estate initiatives have been ramped up in 2009 and into the coming years.
In the third quarter, Big Lots opened 24 new stores and closed six. Year to date, the chain has opened 52 sites, exceeding its original new-store count plan for the year by two units, The retailer is closing 30 stores — 10 fewer than anticipated — bringing the total store count to 1,361.
The company plans to open more than 52 stores in 2010 and beyond. Big Lots expects to open more of its newer formats, including a smaller 20,000-square-foot prototype, in the near future.
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