Big Lots 2011 Annual Report Download - page 140

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Real Estate
We strategically chose to enter a store growth phase in 2009, as a result of improvements in our store
productivity, increased profitability at a consolidated level as a result of the WIN Strategy and the softening
of the real estate market. Since the beginning of 2009, we have opened 224 new stores, and closed 112 stores,
which has resulted in a net increase of 112 stores, or 8%. The majority of our store openings were what we refer
to as traditional stores, meaning stores in secondary locations and primarily in retail strip centers. In 2009, we
began a new initiative that we refer to as “A” locations, which are stores with a higher occupancy cost, but that
are generally located in the one of the best retail centers within a given market with either a better co-tenant
mix, better income demographics, or both. We had 66 “A” locations in operation at January 28, 2012.
In 2012, we plan to continue our store growth efforts by maintaining the level of new store openings at
approximately 90 new stores and closing approximately 45 stores, or a 3% increase to the current store base. We
anticipate approximately 70 to 75 of our store openings this year will be traditional stores and approximately 15
to 20 of our store openings this year will be “A” location stores, based on expected market availability for our
type and size of locations.
As discussed in “Item 2. Properties,” of this Form 10-K, we have 247 store leases which will expire in 2012.
During 2012, 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 2012 lease expirations, we expect to exercise
our renewal option or negotiate more favorable lease renewal terms sufficient enough to continue to enable us to
achieve an acceptable return on our investment.
Cost Structure
Our goal each year is to continue to generate expense leverage (lower expenses as a percent of net sales).
We believe that several operational changes we have made, which we continue to refine, have significantly
contributed to the achievement of our expense leverage goal. Some of the operational changes made include:
• Controlled inventory levels at our stores and regional distribution centers.
• Purchased and distributed merchandise to our stores in more optimal quantities and pack sizes to
minimize handling in our distribution centers and stores.
• Timed receipt of merchandise in stores closer to the expected display dates in order to avoid
excessive handling of merchandise.
• Increased the percentage of merchandise that arrives in our stores pre-ticketed and pre-packaged for
efficient display and sale.
• Refined our staffing and payroll scheduling models in our stores.
• Invested in energy management systems to actively control utility costs, while reducing energy
consumption.
• Implemented several initiatives which lowered our distribution and outbound transportation
expenses, including re-negotiating carrier contracts or changing carriers and expanding our back
haul volumes.
As a result of these operational changes and certain other initiatives in the business, our overall expenses as a
percent of sales have declined by 570 basis points since 2005 (2011 expense rate of 32.8% versus 2005 expense
rate of 38.5%).
Canadian Segment
As our Canadian segment is also a broadline closeout retailer, we will be implementing merchandising
strategies similar to those in our U.S. segment. Accordingly, while our strategy from a merchandise mix
perspective will be fairly similar with our U.S. segment, the percent mix may vary based on seasonality,
availability of product, and adjustments made for local markets. We believe the merchandising categories of