Big Lots growing bigger in furniture
By Clint Engel -- Furniture Today, March 9, 2003
Columbus, Ohio — Big Lots is getting a lot bigger in furniture — to the tune of over $500 million in furniture and bedding sales this year.
Already one of the bigger furniture retailers in the nation, the closeout specialist plans to add a net 145 furniture departments to new and existing stores this year, further reaping the benefits of one of its most profitable categories.
Of the 90 new stores Big Lots plans to open in the fiscal year that began Feb. 1, 80 will have furniture departments, including its first in Southern California — where it already has opened three departments and could open as many as 12 this year — and its first in Phoenix.
Another 95 furniture departments will be added to existing stores, including 15 where the company will lease additional space to add the departments. Big Lots expects to close about 30 stores this year, which would leave it with the net 145 gain in furniture departments.
In addition, the highly promotional retailer will expand the furniture departments in about 200 existing stores by eliminating hanging apparel in those stores, a category the retailer is gradually phasing out.
And while it's not a main focus, Big Lots will open five new standalone Big Lots Furniture stores and close four for a total furniture store count of 50 at the end of the year.
"Our furniture business has been a great success since its inception seven years ago," said Al Bell, vice chairman and chief administrative officer, in a conference call with the investment community.
"With gross margins, sales productivity and inventory turns that are above the company average, you can see why we love this category," he said. "And the furniture category's synergy with our domestics and home décor categories makes for a strong home furnishing business."
In that seven-year span, the 1,380-store Big Lots has grown into one of the largest furniture retailers in the country.
In the year ended Feb. 1, furniture and bedding sales accounted for almost 12% of the company's nearly $3.87 billion in total sales, or about $440 million, up from about $350 million the year before. That should place it on Furniture/Today's list of the Top 25 U.S. furniture retailers.
Add decorative accessories, and Furniture/Today estimates Big Lots' home furnishings sales are about $1 billion. If the company were classified as a furniture store, that easily would place it among the top 5 of Furniture/Today's Top 100 U.S. furniture stores.
This year, Bell said the company is looking for about $525 million in furniture and bedding sales, which would account for about 13% of total projected sales.
The planned expansion in the furniture category was among several 2003 initiatives the company announced along with its fourth quarter and year-end financial results. Those initiatives include the launch of Big Lot's first national TV advertising campaign, two years ahead of plan, and the construction of a fifth distribution center in Durant, Okla.
Net income for the company last year was $76.6 million compared to a net loss from continuing operations of $28.7 million the year before. The $3.87 billion in net sales was up 12.7% from last year, and same-store sales were up 7.7%.
The company has stores in 45 states, and 689 of the closeout stores, or about 52%, had furniture departments at year's end. Bell said the company expects 60% of its stores will have the departments by Feb. 1 next year.
Bell wouldn't break out specific results for the furniture category, but noted it beat Big Lots' overall sales-per-square-foot average of $124 last year, gross margin of 42.2% and inventory turns of 2.9 times — the latter the highest ever for the company.
Bell estimated that incremental furniture sales from the expansion moves this year will add about 1% to its same-store sales results. Total same-store sales this year are expected to rise in the mid-single-digit range.
"We believe that it's a time when people are very focused on their homes and their families (and) the expansion of our home category is very appropriate," Bell said.
Meanwhile, Big Lots Furniture stores are low on the priority list. The typical Big Lots has a traffic draw similar to a grocery store, Bell said, and furniture departments benefit from that heavy traffic. The freestanding stores "tend to be very much a destination" and don't benefit from such traffic, he said.
The company's furniture stores decreased last year to 49 units from 62.
"The (furniture) departments are our highest priority," Bell said. "Expansions are probably next and freestanding stores are what we do when we don't have any other alternatives."
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