Pantry Loaders Boost Food Sales at Big Lots
Big Lots is planning to expand its assortment of food and consumables to leverage big sales momentum from the pandemic.
The discounter says it saw so many new grocery shoppers during the past few months that it now plans to launch what it calls a "pantry optimization initiative" in September.
"This initiative repositions our food and consumables square footage from food staples to food entertainment and consumables," Big Lots CEO Bruce Thorn said during a first quarter earnings call Friday. "The assortment will include national brands along with everyday low prices coupled with owned brands and closeouts. This offering will allow more of our customers to find more of the items on their shopping list, which will also increase trips."
Thorn said the closeout chain is "positioned to win going forward" in attracting consumers who are staying home and looking for pantry essentials, and also consumers in financial distress looking for deals.
"Our merchandising mix is exactly what consumers want and need today, filled with food, consumables and stay-at-home assortments with structurally sound margins," Thorn said. "Our loyal customer base has increased in size over the last few months."
Big Lots said it is reconfiguring the front of its stores to free up square footage for consumables to drive higher revenue, increase box productivity and generate more margin per square foot.
Big Lots also plans to launch Instacart in the next few months and is exploring other same day delivery services.
"We believe this is a very important next step in our omnichannel experience and we are exploring other same-day delivery services for our larger product assortments, including furniture," Thorn said. "The growing popularity of curbside pickup, which we added in Q1 has validated the opportunity we see to grow these convenience options at an accelerated pace to meet the customers' new demands both throughout the crisis and in the post-COVID-19 world."
For the first quarter ended May 2, Big Lots reported net income of $49.3 million, or $1.26 per diluted share, compared to adjusted net income of $37 million, or 92 cents per diluted share (non-GAAP), for the first quarter of fiscal 2019. The higher profits come even as the pandemic has resulted in the company increasing wages and spending more money on store cleaning.
Net sales for the first quarter of fiscal 2020 totaled $1,439 million, an 11.1% increase compared to $1,296 million for the same period last year, with the growth resulting from an impressive 10.3% increase in same-store sales and sales growth from new and relocated non-comp stores.
"I am very proud of our team over the past quarter. We've grown as an organization through these unprecedented times, and it has been amazing to see the team step up our game," Thorn said. "We are off to a strong start in the second quarter, and believe we are well positioned to navigate through the ongoing COVID-19 crisis, with strong alignment between our assortment and current customer demand. Equally, we are very focused on ensuring sustainable improvements in our business beyond the crisis. We are applying the learnings of the last few months and continue to roll out our Operation North Star strategies to support our positioning as a go-to neighborhood discount retailer."
For the second quarter to date, Thorn said same-store sales are up strongly, reflecting a continuation of the acceleration in business that began in mid-April. The company said it expects comp trends to moderate over the balance of the quarter due to a number of factors, including competitors and other retailers reopening, the planned cancellation of the July Friends and Family event, potential inventory constraints in certain categories, and the abatement of stimulus-driven demand.
Assuming same-store sales for the second quarter increased in line with the first quarter, the company would expect diluted EPS to be in the range of 65 to 80 cents. Based on quarter to date sales, the company said it believes the foregoing same-store sales assumption is conservative.
Big Lots, based in Columbus, Ohio, operates 1,404 retail stores. The company is No. 46 on The PG 100, Progressive Grocer’s 2020 list of the top food retailers in North America.