Big Lots 2010 Annual Report Download - page 96

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2010, we began testing promotional offers, based on past purchasing behaviors collected by this
technology. During 2011, we believe we will gain further insight on how these targeted messages and
promotional offers drive a member’s purchasing behaviors, so that we create marketing campaigns
with more predictable results.
• Second, using our printed advertising circulars and promotional pricing to create excitement
surrounding the deals that we offer. The excitement created by such deals is predominantly achieved
through price but the uniqueness of an item may also be a factor.
From a store operations perspective, we began the company-wide rollout of our “Ready for Business” program
in 2009. The program has certain performance criteria and standards focused on improving the consistency
of visual presentation, merchandise recovery efforts, and overall store cleanliness. “Ready for Business”
also focuses on improvements in our employee training programs and hiring practices. This higher level of
expectation and accountability within our store operations team increased the turnover rate of our district
managers, store managers, and assistant store managers in 2009 and required us to recruit new talent into the
organization in 2010. We believe the continued focus on “Ready for Business” standards and investments made
in talent has improved our sales on an average basket basis.
In 2011, we will continue to emphasize the “Ready for Business” standards with focuses on management
development, customer service, and checkout efficiency. As we continue to pursue our store growth strategy, we
will focus on developing our internal talent so that we have the ability to fill new management positions created
by store openings with qualified internal candidates who have a strong understanding of our business model.
Our focus on customer service and checkout efficiency supports our goals to enhance the customer shopping
experience and improve sales.
Real Estate
From 2006 through 2008, we slowed our rate of new store openings based on our belief that many of 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 that three-year period, we opened 39 new stores, while we
closed 101 existing stores 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 potentially
more productive location. These decisions resulted in a net decrease of 62 stores during this time period.
As a result of improvements in our store productivity, increased profitability as a result of the WIN Strategy
and the softening of the real estate market, we strategically chose to enter a store growth phase in 2009. Since
the beginning of 2009, we have opened 132 new stores (80 in 2010 and 52 in 2009) while closing 73 stores
(43 in 2010 and 30 in 2009), which has resulted in a net increase of 59 stores. In 2009, the majority of our new
store openings (40 stores) were what we refer to as traditional stores, meaning stores in secondary locations
and primarily in retail strip centers. Additionally, in 2009 we tested two new store initiatives: “A” locations
(8 stores), which are stores with a higher occupancy cost, but the locations are generally in the best retail center
within a given market with either a better co-tenant mix, better demographics, or both, and a smaller store
concept (4 stores). In general, new store openings performed very well in 2009 with “A” locations exceeding
our expectations, traditional stores meeting our overall expectations and our small store test producing mixed
results. Based on the results of the 2009 new store initiatives, we chose to open 33 “A” locations in 2010. We did
not open any new smaller store concepts, as we continued to test and adjust the format to learn what needs to be
included in the reduced assortment to have this format meet our expectations.
As discussed in “Item 2. Properties,” of this Form 10-K, in 2011, we have 245 store leases which will expire.
During 2011, we anticipate closing approximately 45 of those locations. The majority of these closings will be
the result of our choice to relocate the store to an improved location nearby. The balance of the closings will be
the result of either a lack of renewal options or our belief that we can no longer generate an acceptable financial
return in the location. For our remaining store locations with fiscal 2011 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.