Big Lots, Inc., through its wholly owned subsidiaries, is a home discount retailer operating in the United States (‘U.S.’).
The company operates various stores and an e-commerce platform. The company uses the following six merchandise categories, which are consistent with the company’s internal management and reporting of merchandise net sales: Food; Consumables; Soft Home; Hard Home and Other; Furniture; and Seasonal. The Food category includes the company’s beverage & grocery; specialty foods...
Big Lots, Inc., through its wholly owned subsidiaries, is a home discount retailer operating in the United States (‘U.S.’).
The company operates various stores and an e-commerce platform. The company uses the following six merchandise categories, which are consistent with the company’s internal management and reporting of merchandise net sales: Food; Consumables; Soft Home; Hard Home and Other; Furniture; and Seasonal. The Food category includes the company’s beverage & grocery; specialty foods; and candy & snacks departments. The Consumables category includes the company’s health, beauty and cosmetics; plastics; paper; pet; infant; stationery; and chemical departments. The Soft Home category includes the company’s apparel; hosiery; jewelry; frames; fashion bedding; utility bedding; bath; window; decorative textile; and area rugs departments. The Hard Home and Other category includes the company’s small appliances; table top; food preparation; home maintenance; home organization; toys; and electronics departments; and other offerings. The Furniture category includes the company’s upholstery; mattress; ready-to-assemble; home decor; and case goods departments. The Seasonal category includes the company’s lawn & garden; summer; Christmas; and other holiday departments.
The company operates in the consumer retail industry through brick-and-mortar stores and digitally through an e-commerce platform.
Merchandising
The company’s merchandising strategy primarily focuses on product sourcing, particularly closeout sourcing and global sourcing.
The company utilizes traditional sourcing methods in purchasing imported and domestic products.
The company’s global sourcing team and overseas vendor relationships continue to represent important components of the company’s merchandising strategy. During 2023, the company purchased approximately 21% of its merchandise directly from overseas vendors, including approximately 13% from vendors located in China. Additionally, a significant amount of the company’s domestically-purchased merchandise is manufactured abroad.
Advertising and Marketing
The company employs an integrated approach for its marketing touchpoints and investments consisting of: (1) paid media, including television, print, digital, social media, internet, e-mail, and payment card-linked marketing; (2) earned media, including public relations and organic social media; and (3) owned media, including the company’s website, customer loyalty programs, and in-store signage.
The company has conducted extensive consumer research to enhance its understanding of why customers shop the company and the reasons why others do not shop the company. The company has used this research to refine its brand positioning and implement changes to the company’s messaging across all marketing touchpoints.
At February 3, 2024, the company’s customer loyalty program, which the company calls the ‘BIG Rewards Program,’ included approximately 20 million active members who had made a purchase in the company’s stores in the last 12 months. The company utilizes insights gained through the BIG Rewards Program to evaluate the effectiveness of its promotions, tailor promotions to the company’s customers’ shopping habits, and gain consumer insights. The company’s research shows that membership in the BIG Rewards Program helps drive net sales.
The company’s community-oriented approach to retailing includes ‘doing good as the company does well,’ which means supporting both local and national causes that aid the communities in which the company does business. The company invests in point-of-sale campaigns in each of the company’s geographic regions, the beneficiaries of which are selected based on their impacts on local customers and associates. The company serves the community on a national level through its Big Lots Foundation, which focuses on healthcare, housing, hunger, and education.
Warehouse and Distribution
While certain of the company’s merchandise vendors deliver directly to its stores, the large majority of the company’s inventory is staged and delivered from the company’s distribution centers to facilitate prompt and efficient distribution and transportation of merchandise to the company’s stores and help maximize the company’s sales and inventory turnover.
The majority of the company’s merchandise offerings are processed for retail sale and distributed to the company’s stores from five regional distribution centers located in Alabama, California, Ohio, Oklahoma, and Pennsylvania.
The company selected the locations of its regional distribution centers to help manage transportation costs and to minimize the distance from the company’s distribution centers to its stores.
In addition to the company’s regional distribution centers that handle store merchandise, the company operates two other warehouses within its Ohio distribution center. One warehouse distributes fixtures and supplies to the company’s stores and its five regional distribution centers and the other warehouse serves as a fulfillment center for the company’s direct-ship e-commerce operations. To supplement the company’s e-commerce fulfillment center, the company also fulfills direct-ship e-commerce orders from 66 of the company’s store locations, which the company strategically selected based on geographic location, size, and other relevant factors. The company also fulfills some of its e-commerce orders using supplier direct fulfillment, a process in which the customer purchases merchandise through the company’s e-commerce platform, but the merchandise is shipped directly from the supplier to the customer. Supplier direct fulfillment is primarily used for bulky items that are more costly to warehouse and ship. The company also direct-ships a limited assortment out of its distribution center in California to fulfill some of the company’s e-commerce orders. The company continues to evaluate the company’s e-commerce fulfillment capabilities to reduce shipping times and expenses.
In 2021 and 2022, the company opened four small-format forward distribution centers (‘FDC’) located in Georgia, Pennsylvania, Washington, and Indiana to divert processing and logistics for bulk goods out of the company’s regional distribution centers into the company’s FDCs and to increase the efficiency and capacity of the company’s regional distribution centers, which were designed to efficiently process cartons as opposed to bulk goods. In 2023, the company ceased all business operations at its FDCs, subleased the company’s Georgia and Indiana FDC locations to third-party tenants, and terminated the lease for the FDC located in Lacey, WA. The company ceased all business operations at its FDCs due to the decline in sales volume, and to reduce operational expenses and right size the company’s warehouse and distribution network. The company is actively marketing the remaining FDC site in Pennsylvania for sublease, which has a remaining lease term of approximately 2.7 years.
The company will continue to evaluate its supply chain needs based on projected purchasing volumes and adjust the capacity of the company’s distribution and fulfillment network accordingly.
Seasonality
The company has historically experienced seasonal fluctuations in its sales and profitability, with a larger percentage of the company’s net sales and operating profit realized in the company’s fourth fiscal quarter (year ended February 3, 2024), which includes the Christmas holiday selling season. The company historically receives a higher proportion of merchandise, carries higher inventory levels, and incurs higher outbound shipping and payroll expenses as a percentage of sales in the company’s third fiscal quarter in the anticipation of increased sales activity during the company’s fourth fiscal quarter. Performance during the company’s fourth fiscal quarter typically reflects a leveraging effect which has a favorable impact on the company’s operating results because net sales are higher and certain of the company’s costs, such as rent and depreciation, are fixed and do not vary as sales levels escalate.
The seasonality of the company’s net sales in the last three years was generally aligned with the company’s historical seasonality. The seasonality of the company’s operating results, however, differed significantly due to the company’s recording an operating loss in the first, second, and fourth quarters of 2023 and every quarter of 2022, compared to only one quarter in 2021. This change in the seasonality of the company’s operating results is primarily attributable to inflationary and macroeconomic pressures experienced throughout 2022 and 2023, which resulted in decreased net sales, decreased gross margin as a percentage of net sales, and increased selling and administrative expenses.
History
Big Lots, Inc. was founded in 1967.
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