Big Lots 2014 Annual Report Download - page 102

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Real Estate
We have determined our average store size of approximately 22,000 selling square feet is appropriate for us to provide our core
customers with a positive shopping experience and properly present a representative assortment of products in the merchandise
categories that our core customer finds meaningful. Accordingly, when we relocate or open new stores in the future, we intend
to open stores of a similar size. Additionally, in 2014, we established more stringent merchandise presentation and store layout
requirements for our new properties, which are intended to ensure a more consistent shopping experience across our stores. In
2012 and 2013, we performed store remodel programs in approximately 3% of our stores. Although we believe the remodeled
stores create an improved shopping experience, incremental sales results for these markets in 2013 were inconsistent and we
did not continue the roll-out of the program. In 2014, these stores again experienced inconsistent performance; therefore, we
are not planning for a broader roll-out of this program.
In 2015, we will continue to focus on improving our comps and enhancing our core customer’s shopping experience.
Currently, we anticipate a decrease in our total store count in 2015, as we have fewer planned store openings as compared to
expected store closings. As discussed in “Item 2. Properties,” of this Form 10-K, we have 262 U.S. store leases that will expire
in 2015. During 2015, we anticipate closing approximately 45 of those locations. The majority of these closings will result
from 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 Company. The balance of the closings will result from our decision to relocate the store to an improved location nearby.
For our remaining store locations with fiscal 2015 lease expirations, we expect to exercise our renewal option or negotiate lease
renewal terms sufficient to allow us to continue operations and achieve an acceptable return on our investment.
Discontinued Operations
During the first quarter of 2014, we ceased our Canadian operations by closing all of our stores in Canada. Accordingly, we
reclassified the results of our Canadian operations to discontinued operations for all periods presented. In conjunction with the
wind down of our Canadian operations in the first quarter of 2014, we recorded $23.0 million in contract termination costs,
primarily associated with store operating leases, $2.2 million in severance costs associated with our store and corporate office
operations in Canada, and $5.1 million in foreign currency losses associated with the reclassification of the cumulative
translation adjustment from other comprehensive income. After the first quarter of 2014, we incurred approximately $1.9
million in costs, which were primarily associated with professional services and negotiating termination of our leased facilities
with our former landlords.
Additionally, we have elected to classify in discontinued operations the U.S. income tax benefit related to the excess tax basis
in the common shares of Big Lots Canada, Inc. that we should recover as a worthless stock deduction in 2014, as this deduction
was generated from our Canadian operations which we have also classified as discontinued operations. During 2014, the
amount of this income tax benefit that we recognized was $13.8 million.
During 2013, we completed the wind down of our wholesale business, which was located in the U.S. As we ceased wholesale
operations in 2013, we reported the results of our wholesale business as discontinued operations for all periods presented. See
note 13 to the accompanying consolidated financial statements for a more detailed discussion of all of our discontinued
operations.