Big Lots Test Store Experiments in Improvement

Last Updated Jul 7, 2009 2:37 PM EDT

Big Lots is cleaning up its act and is well positioned to grow as recovery takes hold in the market, noted Wedbush Morgan analyst Joan Storms after meeting with company executives including CEO Steve Fishman and touring a store near the company's Columbus, Ohio headquarters used to evaluate new ideas.

Storms told Bnet she was impressed with key initiatives and operational tests the company has launched, currently rating its stock at buy. Big Lots improved earnings per share by two cents in the first quarter to 44 cents versus the year-earlier period with a 0.5 percent decrease in comparable stores sales.

The tour store is located adjacent to the Polaris Fashion Place mall in Columbus, and, at about 35,000 square feet, is somewhat larger than is typical for Big Lots. The former Linens 'N Things space is in a more upscale environment than is common for a Big Lots store, but Storms said the company is using the location to its advantages as it tests fresh notions on a wide range of customers.

Among its Polaris experiments, Big Lots mounts the seasonal product presentation at the front of the store rather than at the rear as would be typical. Results from the test are pending, Storms said. It also is experimenting with a secondary consumables presentation near the entrance.

In addition, the Polaris store is an example of a food and consumables initiative that Big Lots has been rolling out, Food Refresh. Big Lots executives devised Food Refresh to clean up and maintain the edibles presentation. Food represents about 10 percent of sales. Storms said:

Their feeling is that this should be the cleanest looking part of the store. They have new signage on the shelves emphasizing quality and focusing on guaranteed freshness of the brands you want to buy at low prices. They're really emphasizing value. They're also testing new fixtures that they brought from the consumables area with sharp price points of $1, $2, $3 and $5 depending on the offering, and they are pulling those out in front so customers get them right in the face as they enter the store. They have new signage positioned all around the store and just higher than eye level with their slogan Real Value. Real Savings. The Real Deal. It all reflects efforts in the in-store operation to really immediately clean up and make things customer friendly. That's why they're calling the initiative Year of the Store.
Implemented by Chris Chapin, Big Lots senior vice president of store operations, in the 12 months or so since he joined the chain, Year of the Store makes unit managers accountable for meeting Food Refresh and related product presentation standards. It enforces a higher level of accountability throughout store operations, Storms said, and, so, has the potential to boost performance and consistency.

While food and consumables are important to Big Lots, they aren't as prominent, at about 30 percent of the floor space, as at dollar stores such as Dollar Tree. By making seasonal, and food and consumables more conspicuous, Storms noted, Big Lots is reminding consumers about product categories they can purchase regularly.

That's important because Big Lots weighs its assortment toward discretionary goods with furniture and electrics among its leading categories. By positioning products such as furniture as low-cost replacement goods at a time when consumers are buying discretionary products at need, Big Lots has been able to hold its own in the recession, Storms noted. So it is positioned for improvement as recovery takes hold among consumers likely to remain cautious about big purchases. Enhanced food and consumables operations that bring customers in more often to consider the product presentation can only help the retailer keep its proposition on consumer minds.