Big Lots 2008 Annual Report Download - page 88

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Our marketing efforts involve a mix of printed circulars, in-store marketing, television, and online advertising.
Many of the products we offer in our circulars are a result of the merchandising strategies discussed above. The
planning and coordination that goes into these circulars improves their effectiveness and helps to drive sales,
gross margin dollars, and the inventory turnover rate. Much of our marketing is based on information that we
have learned about our customers, principally through customer surveys. Based on this information, we believe
over 80% of our customers come to our stores without a shopping list or without a specific item or brand in
mind to buy. Value dominates top of mind awareness as our customers look to us for savings. Almost one half
of our customers surveyed said their shopping trips last over 30 minutes, which we interpret as them coming
to shop our stores for the “treasure hunt.” We have improved, and expect to continue to develop, our in-store
signage and merchandising displays and arrangements. Lastly, we continue to market to our Buzz Club, by
offering a free online membership and alerting them to new merchandise and offerings in our stores.
From a marketing perspective in 2009, we plan to increase the focus on our messages of “value” and “savings”
available to customers who shop our stores. Our new in-store signage, print, and television advertising
will emphasize these messages. The marketing efforts and in-store presentation will focus on merchandise
categories that we believe our customers are most interested in, such as Consumables and Hardlines, and that
offer particularly great value to the customer.
From a store operations perspective, we have initiated a “Ready for Business” program, which is aimed at
improving our net sales by focusing on the consistency and timeliness of in-store merchandising execution and
generally improving customer service. The program also focuses on improvements in our employee training
programs and hiring practices, and implementation of our merchandising strategies including presentation of
merchandise in our stores. We believe that improvements made in these areas of our stores will result in a better
shopping experience for our customers and, in turn, may result in higher net sales for us.
Real Estate
In 2006, we slowed our rate of new store openings based on our recent new store performance and the belief
that the real estate locations available to us in the marketplace were too expensive and as such the return on
investment would not be satisfactory to our shareholders. During 2006 through 2008, we opened a total of only
39 new stores (11 in 2006, 7 in 2007, and 21 in 2008). During the same timeframe, we closed 101 existing stores
(37 in 2006, 29 in 2007, and 35 in 2008) for various reasons including lack of profitability, proposed new lease
terms where rents were escalating and landlords were unwilling to renegotiate terms, or relocating the store to a
better or potentially more productive location.
Throughout 2008, economic conditions in the United States deteriorated leading many retailers to close
significant numbers of stores that were similar in size to our stores and were located in markets of interest to us.
Many of these same retailers have scaled back planned future capital expenditures, including their future store
opening plans. These developments, along with other economic factors, have led to real estate opportunities at
favorable lease rates, the availability of higher quality locations, and the availability of more locations.
As a result of improvements in our store productivity and overall profitability over the last three years and the
softening of the real estate market, we expect to grow our store base in 2009 for the first time in the last five
years. We plan to open 45 new stores and close approximately 40 stores in 2009. The openings are expected to be
throughout the country with the largest concentration of new stores in the Northeast, North Carolina, South Carolina,
Florida, California, Oregon, and Washington. These markets have historically been some of the more difficult areas
to find store leases in our price range. Additionally, in 2009 we plan to test a smaller (approximately 20,000 gross
square feet) store to better understand the impact that carrying an edited assortment of merchandise in a smaller store
has on sales productivity and profitability. We believe there are a number of store locations available to us in this size
range. If successful, a smaller store could represent additional growth opportunities for us over the long term. We
expect to test the small store concept during 2009 before making any determination about future inclusion of this
store concept in our long term strategy.
We believe we have opportunities with respect to the lease options included in our existing store leases. As
stated in Item 2. Properties, of this Form 10-K, we have 247 store leases that expire in 2009. We expect to
close approximately 40 of these stores, some of which have not performed to our expectations, some of which
have no more lease renewal options and we expect the landlord to choose a different tenant, and some of which