A Peek into Big Lots' Future Expansion Plans
- Big Lots has bold ambitions, hinting at the possibility of ** Expanding up to 500 new stores** in the coming years.
- The retail powerhouse is aiming to add over 50 new stores this year and later more than 80 per year, as per an investor presentation.
- These store openings, combined with strategies to boost merchandise sales productivity and grow e-commerce, aim to take Big Lots' sales to $8 billion to $10 billion in the long run.
Insights into Big Lots' Growth Strategy
Expanding store network: Big Lots intends to open 500 additional locations.
Discounters, contrary to popular belief, have generally ignored the memo on physical store downsizing. Despite years of bankruptcies, store closures, mall struggles, and the so-called "retail apocalypse" triggered by e-commerce, off-pricers, dollar stores, and others have continued to expand their presence in the U.S.
Similar to off-price retailers like TJX Cos., Ross Stores, and Burlington, Big Lots uses the "treasure hunt" approach to drive customers to its stores and keep them coming back, hunting for deals and surprises. Unlike its peers, Big Lots offers a diverse assortment of categories, which includes food and consumables (around 25% of its sales), furniture, home goods, apparel, electronics, and seasonal products.
In contrast to the industry norm, Big Lots is prioritizing digital and omnichannel growth. Its e-commerce penetration stands above 5%, outpacing off-pricers such as Burlington, which shut down its e-commerce operations a couple of years back. This digital indifference can be attributed to economic factors and the unnecessary requirement for e-commerce in off-price stores, given their consistent and significant sales growth over the past years, pandemic notwithstanding.
Going forward, Big Lots targets transforming its e-commerce arm into a $1 billion sales channel, aiming for digital penetration of 10% to 15%. However, its plans to open hundreds of new stores (after a decade of store count stability) demonstrate that the physical store remains as relevant as ever for the retailer. The company estimates that this store growth could potentially add $2 billion to its sales.
Challenges Ahead for Big Lots
Since the beginning of the month, Big Lots has experienced a softening of traffic and sales trends, which it believes is primarily driven by the rapid spread of the Omicron strain of COVID-19 and its impact on consumer behavior. Consequently, it anticipates its comps to fall below expectations and a hit on earnings.
Apart from the recent COVID-19 surge, analysts at Telsey Advisory Group note that "Big Lots' performance remains clouded by significantly higher supply chain and freight pressures, which are likely to persist well into 2022, and the consumer spending environment uncertainty as we lap the US government stimulus in 1H22."
The retailer posted operating and net losses of more than $4 million in the third quarter. During a December call with analysts, Big Lots CEO Bruce Thorn cited waning stimulus, supply chain disruption, inflation, and labor constraints as factors affecting the company's performance.
- Despite the ongoing pandemic, Big Lots aims to expand up to 500 new stores in the coming years, hinting at a resilient environment for retail growth.
- The company plans to add over 50 new stores this year and later more than 80 per year, marking a significant shift in its expansion policy.
- As part of its growth strategy, Big Lots intends to transform its e-commerce arm into a $1 billion sales channel, aiming for digital penetration of 10% to 15%.
- Big Lots, unlike many other retailers, is prioritizing digital and omnichannel growth, even though it experienced economic challenges due to higher supply chain and freight pressures.
- The company's e-commerce penetration stands above 5%, outpacing off-pricers such as Burlington and demonstrating its commitment to digital innovation.
- In addition to its digital growth, Big Lots continues to focus on its physical stores, believing they remain as relevant as ever for the retailer.
- The rapid spread of the Omicron strain of COVID-19 has caused Big Lots to experience a softening of traffic and sales trends, resulting in a potential hit on earnings.
- Analysts at Telsey Advisory Group also note that Big Lots' performance could be affected by supply chain disruption, inflation, and labor constraints.
- Big Lots' CEO, Bruce Thorn, cited these factors along with waning stimulus as reasons for the company's performance challenges during a recent call with analysts.
- As markets continue to evolve, Big Lots' focus on a diverse product range, including food, furniture, electronics, and seasonal products, could provide it with a competitive edge in the retail industry.
- The government's policy regarding stimulus and inflation, the continued evolution of e-commerce and AI in retail, and cultural shifts in consumer behavior will all play a role in Big Lots' future performance and success.
