Big Lots 2012 Annual Report Download - page 107

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Net sales increased $105.1 million or 2.0% to $5,245.3 million in 2012, compared to $5,140.2 million in 2011.
Net sales increased by $236.9 million principally due to the net addition of 44 stores since the end of 2011 and
an additional week of sales, as 2012 was a 53-week retail calendar year. This growth was partially offset by a
2.7% decrease in comparable store sales, which reduced net sales by $131.8 million. Our comparable store sales
are calculated by using all stores that were open for at least fifteen months. The sales increase in the Furniture
category was driven by upholstery, mattresses, and case goods, partially offset by a decrease in ready-to-
assemble furniture. The Consumables category experienced an increase in most departments, particularly
the paper, household chemicals and housekeeping departments, which was partially offset by lagging health
and beauty care sales. The increase in sales of our Home category was primarily due to growth in both the
domestics and food preparation departments, offset by declines in most other Home departments. During 2012,
we allocated additional selling space in our stores to the Home category in an effort to increase sales in this
higher margin category. This initiative did not meet our expectations and was a factor in certain management
changes of this key category. The Food category experienced increases in nearly all departments as customers
continue to respond to our new assortments and specialty offerings. The Seasonal category increase was driven
by strong sales of our Christmas trim assortment and moderate growth of our lawn & garden and summer
departments, partially offset by a decrease in sales of our fall seasonal departments. The decrease in the
Electronics & Other category was primarily driven by lower sales in the apparel, lingerie and infant accessories
departments as we allocated less space and reduced our assortments, which allowed for the space expansion
in our Home category. These declines were partially offset by growth in jewelry and electronics, the latter of
which benefited from a favorable response to our tablet computer offerings. The decrease in the Hardlines &
Toys category was primarily driven by a decrease in our toys department, which was further downsized during
2012, partially offset by an increase in the appliances department which benefited from an increase in branded
closeouts in 2012 compared to 2011.
For 2013, we expect net sales to increase 2% to 3%, which is based on comparable store sales in the range of
flat to an increase of 1%. Growth rates of total sales will be impacted by one less week of selling in fiscal 2013
compared to 2012.
Gross Margin
Gross margin dollars increased $14.0 million or 0.7% to $2,060.0 million in 2012, compared to $2,046.0 million
in 2011. The increase in gross margin dollars was principally due to an increase in net sales, which increased
gross margin dollars by approximately $41.8 million. Partially offsetting the increase was a lower gross margin
rate, which decreased gross margin dollars by approximately $27.8 million. Gross margin as a percentage of net
sales decreased 50 basis points to 39.3% in 2012 compared to 39.8% in 2011. The gross margin rate decrease
was principally due to a higher markdown rate and the $5.6 million, or 10 basis points, impact of the change
in accounting principle related to the implementation of new retail inventory systems implemented at the
beginning of 2012.
For 2013, we expect our gross margin rate to be slightly higher than 2012, as we anticipate slightly lower
levels of markdowns will be necessary to achieve our planned sales volume and the impact of the change in
accounting principle in 2012 was a non-recurring charge.
Selling and Administrative Expenses
Selling and administrative expenses were $1,644.6 million in 2012, compared to $1,599.8 million in 2011. The
increase of $44.8 million or 2.8% was primarily due to increases in store occupancy expenses of $16.5 million,
store payroll expenses of $15.9 million, health benefit expenses of $11.4 million, corporate office payroll of
$6.3 million, and professional fees of $3.0 million, partially offset by a decrease in share-based compensation
expense of $7.2 million and lower bonus expenses of $5.3 million. The increase in store payroll and store
occupancy expenses were primarily due to the net increase of 44 stores compared to the end of 2011. The
increase in health benefits expense was primarily driven by costs associated with certain large claims that were
expensed during 2012 as compared to 2011, a year in which we experienced few costs associated with large
claims. Our corporate office payroll costs increased primarily due to the growth in our merchandising team and
lower capitalization of salaries associated with information systems projects, as our SAP® implementation was
completed at the end of 2011. The increase in professional fees was primarily driven by increased legal expenses