Big Lots 2013 Annual Report Download - page 168

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In 2013, we analyzed our customer financing program available in our Furniture & Home Décor category, and concluded that
our current offering was not competitive as too few of our customers were qualifying for access. Effectively, we were not
providing an adequate financing solution to assist our core customer in completing the larger purchases that the customer may
have desired. In response to this conclusion, in the second half of 2013, we tested a new lease-to-purchase solution provided
by a third party. To date, our new provider’s program has qualified a larger percentage of our core customers for access to
financing. In 2014, we will implement an expanded roll-out of the new lease-to-purchase program to approximately 1,300
stores, or more than 85% of our total fleet. We believe the new lease-to-purchase program will increase comps in the Furniture
& Home Décor category as our core customer will have a convenient source of financing to either complete or expand her
home furnishing purchases.
Real Estate
We have determined our average store size of approximately 22,000 selling square feet is an appropriate size for us to provide
our core customers with a positive shopping experience and properly present our restructured merchandise categories. This
store size enables us to present a representative assortment of products in the merchandise categories that our core customer
finds meaningful; therefore when we relocate or open new stores in the future, we intend to open stores of a similar size. In
2012 and 2013, we performed store remodel programs in approximately 3% of our stores in five geographic markets: Miami,
Florida; Tampa, Florida; Modesto, California; San Francisco, California; and in the border region of Tennessee and Virginia.
Although we believe the remodeled stores created an improved shopping experience, incremental sales results were
inconsistent and did not generate enough evidence to support a broader roll-out this program.
Our focus will be on improving our comps and enhancing our core customer’s shopping experience. Currently, we anticipate a
slight decrease in our total store count in 2014. As discussed in “Item 2. Properties,” of this Form 10-K, we have 285 U.S.
store leases which will expire in 2014. During 2014, we anticipate closing approximately 50 of those locations. The majority
of these closings will be the result of either relocation to a better location, a lack of renewal options, or our belief that a
location’s sales and operating profit volume are not strong enough to warrant additional investment in the location. As part of
our evaluation of potential store closings, we consider our ability to transfer sales from a closing store to other nearby locations
and generate a better overall financial result for the geographic market and the overall company. The balance of the closings
will be the result of our choice to relocate the store to an improved location nearby. For our remaining store locations with
fiscal 2014 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.
Canadian Segment
During 2013, we announced that the Canadian Wind Down would begin in the fourth quarter of 2013 and continue through the
first quarter of 2014. During the fourth quarter of 2013, we discontinued receiving merchandise and closed our distribution
centers. During the first quarter of 2014 and prior to filing this Form10-K, we closed all of our remaining stores. Additionally,
we transferred the majority of our administrative functions from our office in Brantford, Ontario to our office in Columbus,
Ohio.
We also intend to close our office in Brantford, Ontario in its entirety during the first quarter of 2014.
Discontinued Operations
During 2013, we completed the wind down of the wholesale business within our U.S. segment. As the operations were ceased
in 2013, we reported the results of our wholesale business as discontinued operations and reclassified our prior period results,
both consolidated and those of our U.S. segment, to reflect this change from continuing operations to discontinued operations.
We continue to incur an insignificant amount of costs on the 130 stores we closed in 2005 that are classified as discontinued
operations. We also report certain activity related to our prior ownership of the KB Toys business in discontinued operations.
See note 14 to the accompanying consolidated financial statements for a more detailed discussion of all of our discontinued
operations.