Big Lots 2014 Annual Report Download - page 106

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2013 COMPARED TO 2012
Net Sales
Net sales by merchandise category, in dollars and as a percentage of total net sales, net sales change in dollars and percentage,
and comps from 2013 compared to 2012 were as follows:
(In thousands) 2013 2012 Change Comps
Furniture & Home Decor $ 1,072,410 20.9% $ 1,060,993 20.4% $ 11,417 1.1 % (0.5)%
Consumables 918,124 17.9 905,444 17.4 12,680 1.4 1.0
Seasonal 907,787 17.7 923,434 17.7 (15,647) (1.7) (3.3)
Food 747,840 14.6 742,267 14.2 5,573 0.8 0.0
Hard Home 565,126 11.0 591,523 11.3 (26,397) (4.5) (5.2)
Electronics & Accessories 486,331 9.5 556,658 10.7 (70,327) (12.6) (13.1)
Soft Home 427,137 8.4 431,999 8.3 (4,862) (1.1) (2.1)
Net sales $ 5,124,755 100.0% $ 5,212,318 100.0% $ (87,563) (1.7)% (2.7)%
Net sales decreased $87.6 million or 1.7% to $5,124.8 million in 2013, compared to $5,212.3 million in 2012. The decrease in
net sales was primarily driven by a 2.7% decrease in comparable store sales, which reduced net sales by $131.5 million, and the
reduction of one week of sales in 2013 compared to 2012, as 2012 was a 53-week retail calendar year. Our comps are
calculated by using all stores that were open for at least fifteen months. This decline was partially offset by an increase of
$43.9 million, principally due to operating a higher average number of open stores during 2013 than 2012. Consumables
experienced a comp increase, which was principally driven by growth in our pet department, which benefited from a product
and space expansion during the first half of 2013. Food generated a flat comp, which was comprised of negative comps in the
first half of 2013 and positive comps during the second half of 2013, as customers responded to improved consistency of
quality, branded product assortments and closeouts in most major departments. The slight comp decrease in Furniture & Home
Décor was driven by comp decreases in our home décor offerings, partially offset by a comp increase in our traditional
furniture business (e.g. upholstery, mattresses, case goods, and ready-to-assemble departments). The decrease in Soft Home
comps occurred in most departments, which was a significant contributing factor to the re-alignment of the former Home
category. We believe separating Soft Home and Hard Home merchandise and aligning our merchants in those areas will
narrow their focus and allow us to provide an assortment that is consistent with our core customer’s needs. The decrease in our
Seasonal category’s comp was driven by an underperformance during our holiday selling season, particularly in our toys and
Christmas trim departments, which was negatively impacted by the snow and cold weather which occurred early in the holiday
selling season. The Seasonal category decrease was partially offset by a positive performance in our lawn & garden department
driven by a better merchandise assortment in our patio offerings and a favorable summer weather pattern in 2013 compared to
2012. The decrease in Hard Home comps occurred in most departments and was driven by our home maintenance, auto, tools,
and paint departments, which was a primary consideration when determining to exit these classifications after continued
underperformance. The decrease in comps in Electronics & Accessories was primarily driven by lower electronics sales,
particularly in tablet, digital camera, gaming and DVD products, as customers have not responded to our assortment of product
offerings. Additionally, throughout 2013, we began to narrow our product offerings in our electronics department in order to
appropriately react to our customer's response and overall trends for this category in the retail marketplace.
Gross Margin
Gross margin dollars decreased $47.3 million or 2.3% to $2,007.4 million in 2013, compared to $2,054.7 million in 2012. The
decrease in gross margin dollars was principally due to both a decrease in net sales, which decreased gross margin dollars by
approximately $34.5 million, and a lower gross margin rate, which decreased gross margin dollars by approximately $12.8
million. Gross margin as a percentage of net sales decreased 20 basis points to 39.2% in 2013 compared to 39.4% in
2012. The gross margin rate decrease was principally due to a higher markdown rate during the fourth quarter of 2013 as
compared to the fourth quarter of 2012. During the fourth quarter of 2013, we began implementing the “Edit” portion of our
Edit to Amplify strategy, which involved conducting significant promotional activities to reduce our inventory in certain
departments, including auto, tools, and home maintenance, as a result of our planned reductions in the focus and square footage
we intend to dedicate to those departments as well as editing merchandise within other departments.