Big Lots 2009 Annual Report Download - page 139

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As a result of improvements in our store productivity and overall profitability over the last four years and the
softening of the real estate market, we were able to grow our store base in 2009 for the first time in the last five
years. We opened 52 new stores and closed 30 stores in 2009. The majority of our new store openings (41) were
what we refer to as traditional stores, which are secondary or tertiary real estate normally located in retail strip
centers. Additionally, in 2009 we tested two new store initiatives: “A” locations (8) and a smaller store concept
(3). Generally speaking, new store openings performed very well in 2009 with “A” locations exceeding our
expectations, traditional stores overall meeting our expectations and our small store test producing mixed results.
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 230 store leases that expire in 2010. 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
we anticipate exiting by our choice in favor of relocating the store to a new location in a nearby area. For our
remaining approximately 190 store locations with 2010 lease expirations, we expect to exercise our renewal
option or negotiate more favorable lease renewal terms sufficient enough to enable us to achieve an acceptable
return on our investment.
Our real estate strategy has included the following additional investments in our existing fleet of stores in order
to improve operating efficiency:
• In 2007 and 2008, we invested approximately $38 million to implement our new point-of-sale
register system in all of our existing stores with the expected benefits to include more timely and
accurate sales and inventory information, improved customer service through faster speed at
checkout, lower repair and maintenance costs, and improved labor efficiency through the use of
hand-held technology.
• In 2007 and 2008, we invested approximately $7 million in store retrofits and new merchandise
fixtures at approximately 110 of our stores to better feature some of our key merchandise growth
classifications, specifically Furniture.
• In 2009, we tested a new store layout in approximately 20 locations, predominantly in Columbus, Ohio.
The layout test was designed to improve the ease of shopping our stores. It features Consumables
more prominently in our store and improves the visual sight lines within the store. The customer
reaction indicated that the store seemed better organized, cleaner, and has improved lighting, wider
aisles, and generally presents merchandise more effectively. Based on our evaluation of the test
results, we will expand this program to an additional 105 stores in 2010.
• Also in 2009, we made certain investments, both capital and expense, in a “Food Refresh” program.
The program emphasizes cleanliness and merchandise presentation in our food departments and it
included new or refinished fixtures in approximately one half of our stores while all stores received
new signage and shelf labeling. Based on feedback from our customers, we believe improved
cleanliness, better fixtures, and dedicated associate staffing to maintain a better merchandise
presentation instills customer confidence in the quality and freshness of our food merchandise.
In 2010, we plan to increase the level of new store openings to 80 new stores and expect to close approximately
40 stores resulting in net store growth of 40 locations, or 3% of the total store base. In terms of the breakout
of what types of stores we expect to open, the availability of space for our traditional locations remains
good, rents are reasonable, and we estimate we will open approximately 50 traditional stores in 2010. In
regards to “A” locations, we see a meaningful opportunity for growth in 2010 and estimate that we will open
approximately 30 new “A” locations this year. This is a major step forward for our company and has been made
possible by the softening in the commercial real estate market and the strength of our financial performance
over the last several years. Additionally, a higher quality and more branded merchandise assortment along with
improvements in store standards and customer service have given us the confidence that we can be successful
in these locations with a new customer base that has a somewhat higher level of expectations in terms of
the in-store shopping experience. During 2009, we learned a great deal through our small store test about
the operational aspects and the merchandising changes or edits that are critical in this size of store. We will
continue to make modifications to our 3 test stores and monitor their progress. Along the way in 2010, we may
also add a couple of stores to the test.