Big Lots 2009 Annual Report Download - page 136

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The following table sets forth the seasonality of net sales and operating profit for 2009, 2008, and 2007 by
fiscal quarter:
First Second Third Fourth
Fiscal Year 2009
Net sales percentage of full year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.1% 23.0% 21.9% 31.0%
Operating profit as a percentage of full year ...................... 18.5 14.7 14.6 52.2
Fiscal Year 2008
Net sales percentage of full year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.8% 23.8% 22.0% 29.4%
Operating profit as a percentage of full year ...................... 22.8 17.1 7.9 52.2
Fiscal Year 2007
Net sales percentage of full year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.2% 23.3% 22.1% 30.4%
Operating profit as a percentage of full year ...................... 18.0 14.1 9.6 58.3
Operating Strategy
Over the past four fiscal years (fiscal 2006 through fiscal 2009), we have successfully repositioned our business
by concentrating our efforts on the implementation of a strategy we refer to as the What’s Important Now Strategy
(“WIN Strategy”). The WIN Strategy focuses on three key elements of the business: merchandising, real estate,
and the cost structure. The WIN Strategy has been an operating profit growth strategy designed to expand the
operating profit rate of our existing store base. Only recently, in 2009, as the commercial real estate market
softened and rents declined, did we pursue net new store growth. Due to the implementation of WIN, our
operating profit rate has expanded from 0.6% in 2005 to 6.9% in 2009 with operating profit dollars growing
from $26.9 million to $325.0 million during that same time period. The growth in operating profit has translated
to significant growth in earnings per share from continuing operations, which has increased from $0.14 per
diluted share in 2005 to $2.44 per diluted share in 2009. Along the way, we generated approximately $1.5 billion
of cash of which approximately $330 million was capital reinvested in our business and $900 million was
returned to shareholders (aggregate share repurchases in 2006, 2007 and 2008 under publicly announced share
repurchase programs).
In 2010, we anticipate the key elements of the WIN Strategy will remain consistent and we are forecasting
continued operating profit growth. However, we believe we are entering the next phase of the WIN Strategy …
a growth phase. The commercial real estate market has softened, thus providing more real estate available for
us at prices that are more appropriate for our financial model and return on capital requirements. Given the
strength of our financial performance we are in a better position to open new stores and take advantage of the
current real estate market conditions.
In 2010, we expect:
• An operating profit rate of 7.0% to 7.2% based on an estimated comparable store sales increase of
3% to 4%, flat gross margin rate, and expense leverage compared to last year.
• Earnings per diluted share from continuing operations to be $2.65 to $2.75.
• Opening 80 new stores and closing 40 stores, for net growth of 40 stores or 3%.
• Cash provided by operating activities of approximately $315 million less capital expenditures
of approximately $115 million resulting in $200 million of cash available for investment or
redeployment, and
• The remaining $250.0 million of purchases under the 2010 Repurchase Program may be made from
time to time in the open market and/or in privately negotiated transactions at our discretion, subject
to market conditions and other factors. On March 10, 2010, we executed a $150.0 million accelerated
share repurchase transaction.