Big Lots 2011 Annual Report Download - page 137

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Operating Strategy
In 2005, Mr. Fishman joined the Company as its Chief Executive Officer and introduced our current operating
strategy, the What’s Important Now Strategy (“WIN Strategy”). The WIN Strategy focuses on three key
elements of our business: merchandising, real estate, and cost structure. The WIN Strategy was designed to
increase the operating profit performance of our existing store base, which has occurred from 2007 to 2011.
In 2009, driven by both the improvements in our store productivity and the softening of the commercial real
estate market, we expanded our WIN Strategy to also include the pursuit of net new store growth. In 2011,
our Board of Directors approved the purchase of Liquidation World Inc., a Canadian closeout retailer, with the
expectation that the management team could implement the key elements of the WIN Strategy to turn around
its performance. The acquisition was part of the net store growth component of the WIN Strategy. Over the
past three years, we have generated approximately $1,026 million of cash of which approximately $316 million
was reinvested in our business through capital expenditures or investments in our acquired subsidiary and
$701 million was returned to shareholders through publicly announced share repurchase programs.
In 2012, we anticipate the key elements of the WIN Strategy will remain consistent, including the net store
growth phase. We anticipate that the commercial real estate market will continue to provide us with real estate
opportunities at prices that are appropriate for our financial model and return on capital requirements. Given the
strength of our financial performance and the availability of real estate in markets we serve, we believe we will
continue to open new stores.
In 2012, we anticipate:
• Earnings per diluted share from continuing operations to be $3.35 to $3.45, including the expected
impact of a non-cash, non-recurring charge of $0.05 per diluted share related to a change in
accounting principle associated with the implementation of our new retail inventory systems in the
U.S. during the first quarter of 2012.
• Net sales increase in both the U.S. and Canada:
○ U.S. comparable stores sales increase of 2% to 3% and an increase of 8% to 9% in total net
sales in the U.S.
○ Canada sales of $140 million to $150 million, a $78 million to $88 million increase from 2011,
which was a partial year.
• Opening 90 new stores and closing 45 stores, for net growth of 45 stores or 3%, in the U.S.
• Cash provided by operating activities of approximately $330 million to $335 million less capital
expenditures of approximately $130 million to $135 million resulting in approximately $200 million
of cash available for further investment in our business.
• The remaining $98.5 million of share purchase authorization under the 2011 Repurchase Program
may be utilized in the open market and/or in privately negotiated transactions at our discretion,
subject to market conditions and other factors.
The following sections provide additional discussion and analysis of our WIN Strategy with respect to
merchandising, real estate, and cost structure in our U.S. segment and the testing and implementation of the
WIN Strategy in our Canadian segment. The “2011 Compared To 2010” section below provides additional
discussion and analysis of the impact of these strategies on our financial performance and the assumptions and
expectations upon which we are basing our guidance for our future results.