Big Lots 2010 Annual Report Download - page 99

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Net sales increased $225.5 million or 4.8% to $4,952.2 million in 2010 compared to $4,726.8 million in 2009.
The increase in net sales was principally driven by the increase in net stores in 2010, which increased net sales
by $114.3 million, and a 2.5% increase in comparable store sales, which increased net sales by $111.1 million.
Our comparable store sales are calculated by using all stores that were open for at least two fiscal years as
of the beginning of the current fiscal year. This calculation may not be comparable to other retailers who
calculate comparable store sales based on other methods or criteria. The average number of stores in operation
throughout 2010 and 2009 was approximately 1,380 stores and 1,354 stores, respectively. The Furniture, Home,
and Seasonal categories had the largest sales gains in 2010. Sales increased in all departments of the Furniture
category driven by sales of new styles introduced during the year, improvement in the quality of goods, and
successful promotional events targeted around certain holiday selling periods. The Home category continued
its trend of increasing sales across most of its departments with the largest gain in domestics, as we have
improved the value proposition and quality of our product offerings. The Seasonal category increase was due
to higher sales of Christmas, lawn & garden, and summer merchandise as customers responded to both our
updated Christmas assortment and the value and newness offered in certain of our lawn & garden and summer
items. The Hardlines category sales improvement was primarily driven by the electronics department in the
first half of 2010 through the sales of video games, which we began selling in the third fiscal quarter of 2009.
The Consumables category decrease was primarily due to lower food sales, as customers did not respond as
expected to our offerings and assortment during the second half of 2010. The decrease in the Other category
was primarily driven by the absences of certain drugstore closeout deals in 2010 that occurred in 2009 and
lower sales in the toys, infant, and apparel departments.
For 2011, we expect total sales to increase 5% to 6%, driven by net store growth of approximately 3% and
comparable store sales growth of 1% to 2%.
Gross Margin
Gross margin dollars increased $93.2 million, or 4.9%, to $2,012.5 million in 2010 compared to $1,919.3 million
in 2009. Gross margin as a percentage of net sales was 40.6% in both 2010 and 2009. The primary contributor to
the increased gross margin dollars was higher net sales of $225.5 million, which increased gross margin dollars
by approximately $91.6 million. The gross margin rate remained flat at 40.6% in 2010 as compared to 2009. In
2010, we experienced positive trends with lower markdowns, lower shrink costs, and the impact of favorable
merchandise mix, which were offset by higher inbound freight costs and lower initial markups on certain items
sold during the Christmas selling season. Lower markdowns and favorable merchandise mix impact were the
result of strong sales in our higher margin Seasonal and Home categories. Our lower shrink rates were driven by
positive results in our annual physical inventories. The increase in inbound freight costs was primarily driven
by higher diesel fuel costs and higher domestic carrier costs.
For 2011, we expect our gross margin rate to be approximately 40.6%, or flat compared to 2010, as an
anticipated benefit from a favorable merchandise mix and a slightly lower markdown rate are expected to be
offset by rising fuel costs and the corresponding impact on freight expense as well as potential price pressures
on commodities and potential increases in vendor labor costs.
Selling and Administrative Expenses
Selling and administrative expenses increased $44.1 million, or 2.9%, to $1,576.5 million in 2010 compared
to $1,532.4 million in 2009. The increase was primarily due to higher sales and a net increase of 37 stores in
2010. Compared to 2009, the largest increases were store payroll costs of $24.5 million, credit card/bank fees of
$10.3 million, store rent expense of $9.1 million, and store facility and operation costs of $8.0 million. Partially
offsetting these items was a decrease in advertising expenses of $4.2 million. The increase in store payroll was
principally due to the incremental number of stores, store pre-opening costs, and higher sales. The increase
in credit card/bank fees was the result of higher rates charged by debit card network providers, which were
increased at the end of the first quarter of 2010, and from increased sales. Store rents increased primarily due
to the incremental number of stores. Store facility and operation costs increased due to the incremental number
of stores, increased store pre-opening costs (resulting from 80 store openings in 2010 as compared to 52 store