Big Lots CEO: Company is back in growth mode
Columbus-based retailer adding 40 to 60 stores
After nearly a decade of shrinking, Big Lots is back in growth mode.
“Over the next five years, I can see us adding several hundred stores,” Bruce Thorn, the company’s president and CEO, said in an interview with The Dispatch. “That’s conservative.”
Big Lots has 1,422 stores in 47 states, the company said on its second-quarter conference call with analysts on Aug. 27. That’s an increase of 18 stores over the past year, and Big Lots says that growth will accelerate in coming years.
The company had 1,495 stores in 2013, according to the company’s annual report.
Thorn, who became CEO in 2018, sees opportunity in expansion along with refreshing existing stores, intervening in underperforming stores and a growing e-commerce business highlighted by customers who buy online and pick up at the store.
“We are going to increase our fleet. Our customers want us to increase our fleet. We have ... a huge opportunity to be more relevant by having more stores out there across the United States,” Thorn told analysts on the Aug. 27 conference call.
This year, the Columbus-based retailer known for its closeout and discount sales will add about 20 stores and 40 to 60 stores next year, Thorn said.
All 47 states have sites that would be good for Big Lots stores, he said.
“We have become a really nice place for them to shop,” he said of the store’s customers. “We’re seeing big success in infill, urban areas and rural areas. I wouldn’t say one is better than another right now. They’re all just opportunities.”
The retailer did extensive studies in 2019 to find out what Big Lots is lacking and what customers want, he said.
The top reason why customers say they leave is that they move away, Thorn said.
“So we needed to move with them,” he said. “We need to lean back into the deal, lean back into the treasure hunt ... make it more convenient to shop,” he said.
Beyond opening new stores, the retailer wants to upgrade 800 stores with new signs, fresh paint,
“We are dealing with it now and navigating the dynamic and ever-changing complexities of the supply chain. But at the same time, we are leaning into and investing in our future in our promising long-term growth opportunity.” Peter Keith, senior analyst with Piper Sandler
floor repairs, remodeled bathrooms and improved graphics. The average cost per store is around $100,000, according to the company.
At the same time, Big Lots is slowing the rate of closures with an intervention program in which Big Lots goes into under-performing stores and identifies areas for improvement, such as additional training and marketing support.
“In the past, we were closing stores that didn’t need to be closed,” he said.
New Big Lots opens at Morse and Hamilton roads
Last month, Big Lots opened a new store at 4870 Morse Road at the corner of Morse and Hamilton roads in Gahanna, not far from Big Lots corporate headquarters.
“It’s our best looking store. It’s our first step forward in the next phase of Big Lots,” Thorn said.
The store will become a model for what new stores will be like for Big Lots.
Thorn describes Big Lots sales a mix of closeouts and out of season buys; everyday essentials that he says are competitive with other retailers; and seasonal sales.
The store brings back Big Lots where it should be, “the home of the bargain and treasure hunt for your home,” Thorn said.
The store, with 33,595 square feet, is brightly lit with gray flooring, and signs meant to make the store an easy shopping experience.
It includes a 500-square-foot section called the LOT where Big Lots offers a changing selection of items meant to be fun and unique.
In May, for example, the LOT had a selection of camping gear. The LOT also has offered such items as novelty small appliances, large videogame units and Disney-themed items.
“The Lot continues to strengthen as delighting our customers with fun, innovative treasures just right for life’s occasions while delivering nearly 2% of the company sales in the quarter,” he told analysts.
Thorn said the section has served as innovation lab for the company and is a reason why the store has brought back apparel. Other sections of the store have items that can be bought for little as $1.
Furniture, which has become an important item for Big Lots, is front and center in the new store. One thing that is different from other stores is that the lawn and garden section has been relocated to the back and food is now in the center of the store.
“Just because we’ve got deals doesn’t mean we have to look cheap,” Thorn said. “We want to be overly foo-foo, if you will, or too expensive because that’s not what she wants either.”
Big Lots and the pandemic
Big Lots has been a big benefactor of the pandemic as consumers stocked up on food and essentials, and buying furniture and other items for their home given that families were spending more time together because of the pandemic.
Big Lots shares skyrocketed from about $13 per share at their pandemic low in March 2020 to $72 in June. Shares closed at $46.56 on Friday.
In the second-quarter conference call, Thorn laid out the retailer’s sales growth since 2019, before the pandemic began with sales of furniture, apparel, electronics and home goods especially strong.
Sales of Broyhill furniture are on track to hit $1 billion a year, Thorn said.
Sales for the quarter though were off 11.4% from the same period of 2020 during the early days of the pandemic, and shares have been tumbling since.
One analyst recently cut his price target to $50, citing a “trifecta of macro headwinds” Big Lots is facing — a decline in several extra benefit programs during the pandemic, high ocean freight rates and rising labor costs.
The retailer has been a prime beneficiary of federal government stimulus programs during the pandemic given its low and middle income customer base, Peter Keith, senior analyst with Piper Sandler, said in a recent research note.
Piper Sandler expects those benefits to decline by about $1 trillion in 2022, and that figures to be a drag on sales for Big Lots, Keith said.
“Ocean freight rates continue to intensify to all-time highs,” and that figures to be a drag on margins through the first half of 2022, he said. There is no sign that wage pressures are slowing, he said.
“While we believe BIG has several emerging sales/margin drivers that should benefit fundamentals longer term, near-term macro headwinds are likely to overshadow underlying improvement,” he wrote.
Keith cited the accelerating store growth starting in 2022 as a plus for Big Lots along with the store refresh program and introducing a buy-now-paylater option as strategies that could boost sales down the road.
Thorn did acknowledge the challenges the retailer faces, but noted the potential as well.
“We are dealing with it now and navigating the dynamic and ever-changing complexities of the supply chain,” he told the analysts. “But at the same time, we are leaning into and investing in our future in our promising long-term growth opportunity.” mawilliams@dispatch.com @Bizmarkwilliams