Big Lots 2011 Annual Report Download - page 142

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In the third quarter of 2011, we realigned our merchandise categories to be consistent with the realignment of
our merchandising team and changes to our management reporting. Fiscal 2011, 2010, and 2009 sales results
have been reclassified to reflect the realignment.
Net sales increased $187.9 million or 3.8% to $5,140.2 million in 2011, compared to $4,952.2 million in 2010.
The increase in net sales was principally due to the net addition of 53 stores since the end of 2010, which
increased net sales by $179.6 million and a 0.1% increase in comparable store sales, which increased net sales
by $8.3 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. The Consumables category experienced increases
in nearly all departments, in particular food, as customers continue to respond to our new assortments and
specialty offerings. The primary drivers of the sales increase in the Furniture category were the upholstery and
mattresses departments, partially offset by a decrease in case goods as 2010 benefited from a few large closeout
deals. The Seasonal category increase was driven by strong sales of Christmas trim and summer related
merchandise, partially offset by a decrease in our fall seasonal departments. The Home category experienced
growth in the domestics department, where new merchandising initiatives positively impacted sales throughout
the majority of the year. The growth in the domestics department was partially offset by comparable store sales
declines in most other departments. The decrease in the Play n’ Wear category was primarily driven by lower
sales in toys and the apparel departments, partially offset by an increase in the electronics department. We
allocated less space and reduced our assortment of toys and apparel during 2011, and allocated a portion of this
space to electronics based on customer demand. The decrease in the Hardlines & Other category was driven by
decreases in our tools and paint departments as less selling square footage was allocated to these departments in
2011 as compared to 2010. In addition, the Hardlines & Other category was impacted by the absence of certain
drugstore closeout deals in 2011.
For 2012, we expect sales to increase 8% to 9%, driven by net store growth of approximately 3%, comparable
store sales growth of 2% to 3%, and the positive impact on sales of one additional week in 2012, as 2012 is a
53-week fiscal year.
Gross Margin
Gross margin dollars increased $33.6 million or 1.7% to $2,046.1 million in 2011, compared to $2,012.5 million
in 2010. The increase in gross margin dollars was principally due to the increase in net sales which increased
gross margin dollars by approximately $76.4 million. Partially offsetting the increase in net sales was the
decrease in gross margin rate which decreased gross margin dollars by approximately $42.8 million. Gross
margin as a percentage of net sales decreased 80 basis points to 39.8% in 2011 compared to 40.6% in 2010.
The gross margin rate decrease was principally due to the unfavorable merchandise mix impact caused by the
strong sales of our lower margin Consumables category and electronics department, lower initial mark-up on
merchandise receipts, and higher shrink costs.
For 2012, we expect our gross margin rate to be slightly higher than 2011, as we anticipate slightly lower levels
of markdowns will be necessary to achieve our planned sales volume.
Selling and Administrative Expenses
Selling and administrative expenses were $1,599.8 million in 2011, compared to $1,576.5 million in 2010.
The increase of $23.3 million or 1.5% was primarily due to increases in rent expense of $14.7 million, store
payroll expense of $9.3 million, advertising expense of $6.1 million, and outbound transportation expense of
$4.2 million, partially offset by lower bonus expense of $17.1 million. Store payroll and store rents increased
primarily due to the net increase of 53 stores compared to the end of 2010. The increase in advertising expense
was driven by increased print distribution costs associated with new store growth, the roll out of new in-store
point-of-purchase presentations, and support for promotional events. The increase in outbound transportation
costs was largely driven by the net increase of 53 stores along with higher diesel fuel prices. The decrease in
bonus expense was directly related to lower financial performance during 2011 as compared to the targets in our
2011 operating plan and to 2010, which outperformed the targets in our 2010 operating plan.
As a percentage of net sales, selling and administrative expenses decreased by 70 basis points to 31.1% in
2011 compared to 31.8% in 2010. The decrease of 0.7% was primarily due to the effect of the increase in sales
of 3.8% as selling and administrative expense dollars only increased 1.5% as discussed above. Our future