Big Lots 2008 Annual Report Download - page 90

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• Increasing the percentage of merchandise that arrives in our stores pre-ticketed and pre-packaged for
efficient display and sale;
• Refining our staffing and payroll scheduling models in our stores; and
• Implementing several initiatives which lowered our distribution and outbound transportation
expenses.
With respect to distribution and outbound transportation expenses, we have taken advantage of several
opportunities for improvement. Distribution of furniture differs from our other merchandise categories in part due
to the bulk of the product and the impact of that bulk on shipments. Prior to July 2008, furniture was distributed
to our stores from our two furniture distribution centers. The majority of our stores received a weekly shipment
of merchandise from a regional distribution center one day and a separate shipment of furniture from one of
our furniture distribution centers on a different day. This process was inefficient for our stores and distribution
centers. Improvements in managing our inventory and turning our inventory faster have lowered our inventories
and created capacity in our regional distribution centers. Beginning in July 2008, furniture is distributed to many
of our stores through four of our regional distribution centers and combined with other merchandise which results
in fewer shipments and trailers, more efficient unloading processes and less payroll hours needed at the store
level. We continue to operate a furniture distribution center in Redlands, California, which distributes furniture
to many of our West Coast stores. Additionally, we benchmark all aspects of our transportation in an effort
to find new ways to reduce expenses. As a result, we have improved our processes, including optimizing the
timing of deliveries, and we have implemented a vendor compliance program that has generated savings. We also
have reduced our trailer fleet size and changed our mix of carriers. In certain cases, we have found it to be less
expensive overall to use third parties to make one-way shipments where we have historically used our own fleet
for round-trips. While our cost per mile has increased, we have significantly reduced the number of miles required
to deliver our merchandise.
Discontinued Operations
We continue to incur exit-related costs for some of the 130 stores we closed in 2005 that we have classified as
discontinued operations, specifically on the stores where lease obligations remain. We also report certain activity
related to our prior ownership of the KB Toys business in discontinued operations. See note 11 to the accompanying
consolidated financial statements for a more detailed discussion of all of our discontinued operations.
2008 Compared to 2007
Net Sales
As previously discussed, we report net sales information for six merchandise categories in accordance with the
requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. Net sales
by merchandise category, as a percentage of total net sales, and net sales change in dollars and percentage in
2008 compared to 2007 were as follows:
2008 2007 Change
($ in thousands)
Consumables ................. $1,410,383 30.4% $1,339,433 28.8% $ 70,950 5.3%
Home ....................... 713,103 15.4 783,047 16.8 (69,944) (8.9)
Furniture .................... 698,276 15.0 687,292 14.8 10,984 1.6
Hardlines .................... 646,563 13.9 629,119 13.5 17,444 2.8
Seasonal..................... 585,025 12.6 597,933 12.8 (12,908) (2.2)
Other ....................... 591,933 12.7 619,478 13.3 (27,545) (4.4)
Net sales .................. $4,645,283 100.0% $4,656,302 100.0% $(11,019) (0.2)%
Net sales decreased $11.0 million (0.2%) to $4,645.3 million in 2008 compared to $4,656.3 million in 2007.
There were fewer open stores in 2008 which caused a decrease of $34.0 million partially offset by our
comparable store sales increase of 0.5%, which increased sales by $23.0 million. Our comparable store sales