Big Lots 2012 Annual Report Download - page 105

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Real Estate
We made a strategic decision to enter a store growth phase in 2009, based on 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, which provided a greater selection of locations at more advantageous lease costs.
Since the beginning of 2009, we have opened 311 new stores, and closed 155 stores, which has resulted in a net
increase of 156 stores, or approximately 12%. The commercial real estate market has been recovering in the
past 18 to 24 months and therefore rents are not as favorable now as they were in 2009, 2010, and in the early
months of 2011. Based on this trend, we have decided to moderate our store growth efforts in 2013 by opening
approximately 50 new stores, while closing an estimated 45 stores.
In 2012, we tested a store remodel program in 16 stores in two geographic markets: Miami, Florida and
Modesto, California. Based on the positive results of the initial testing of this remodel program, we have
decided to expand the test program in 2013 to approximately 30 additional locations in three separate markets
within Florida, California, and Tennessee / Virginia.
As discussed in “Item 2. Properties,” of this Form 10-K, we have 305 store leases which will expire in 2013.
During 2013, 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 2013 lease expirations, we expect to exercise
our renewal option or negotiate more favorable lease renewal terms sufficient enough to allow us to continue
operations and 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). Since
2005, we have made several operational changes that have significantly contributed to the generation of expense
leverage. Those operational changes include:
x Controlled inventory levels at our stores and regional distribution centers.
x Purchased and distributed merchandise to our stores in more optimal quantities and pack sizes to
minimize handling in our distribution centers and stores.
x Timed receipt of merchandise in stores closer to the expected display dates in order to avoid
excessive handling of merchandise.
x Increased the percentage of merchandise that arrives in our stores pre-ticketed and pre-packaged for
efficient display and sale.
x Refined our staffing and payroll scheduling models in our stores.
x Invested in energy management systems to actively control utility costs, while reducing energy
consumption.
x Implemented several initiatives which lowered our distribution and outbound transportation
expenses, including re-negotiating carrier contracts or changing carriers and determining the most
optimal mix of carriers (one-way versus dedicated fleet).
x Tested and implemented lower levels of print advertising distribution in lieu of more cost effective
email distribution.
In 2013, we will continue to refine our activities, including those listed above, along with new initiatives to
control costs in stores and our distribution centers. Additionally, the implementation of certain new systems will
provide opportunity for future expense leverage.