Big Lots 2014 Annual Report Download - page 99

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Operating Strategy
In May of 2013, Mr. Campisi joined us as our Chief Executive Officer and President. Under Mr. Campisi’s leadership, we
reevaluated the key components of our operating strategy, our leadership and organizational structure, and the businesses that
we operated. After performing his review, Mr. Campisi and the senior management team introduced our new operating
strategy, the Edit to Amplify strategy (“Edit to Amplify”), which applies to all aspects of our business, but has a particular focus
on merchandising, marketing, and our customers’ shopping experience, all of which we believe are the key drivers of our net
sales. Edit to Amplify is a strategy that focuses our entire attention on our core customer. We believe our Edit to Amplify
strategy will help us to exceed the expectations of our core customer, to whom we refer as Jennifer, by adopting a customer-
first mentality and delivering a product assortment that meets her everyday needs while delivering excitement and surprises
aimed to drive discretionary purchases. The following sections of this MD&A provide additional discussion and analysis of
our Edit to Amplify strategy. As we continue to implement the new focus of our business, during 2015, we anticipate:
• Earnings per diluted share from continuing operations to be $2.75 to $2.90.
• Comparable store sales increase in the low single digits, partially offset by a lower expected store count, which would
result in approximately flat net sales.
• Opening 15 new stores and closing 45 stores.
• Cash flow (operating activities less investing activities) of approximately $175 million for future reinvestment, return
to shareholders, and/or to lower our obligations under the 2011 Credit Agreement.
• Cash returned to shareholders of approximately $240 million, through our quarterly dividend program and a $200
million share repurchase program.
The “2014 Compared To 2013” section below provides additional discussion and analysis of our financial performance and the
assumptions and expectations upon which we are basing our guidance for our future results.
Merchandising
Our goal of exceeding our core customer’s expectations will be driven by the delivery of a product assortment that is
meaningful to our core customer, combined with the quality and ease of the shopping experience. Our Edit to Amplify strategy
focuses on the two separate “Edit” and “Amplify” components to achieve our goal of exceeding our core customer’s
expectations. The “Edit” component focuses on continuously evaluating our product mix and downsizing, or potentially
eliminating, those departments within our merchandise categories and product offerings which we believe are not top of mind
with our core customer and we do not maintain a competitive advantage. The “Amplify” component of our Edit to Amplify
strategy seeks to expand the assortment of those departments within our merchandise categories and product offerings that we
believe are important to our core customer’s shopping experience and with respect to which we believe we have a competitive
advantage in pricing and/or sourcing. We believe our merchandise categories – Food, Consumables, Soft Home, Hard Home,
Furniture & Home Décor, Seasonal, and Electronics & Accessories – align our business with how our core customer shops our
stores.
Our merchandise categories place differing emphasis on essential items (needs) and discretionary items (wants).
• Our Food and Consumables categories focus primarily on catering to our core customers’ daily essentials, or “need,
use, buy most” items, by providing significant value and consistency of product offerings. We believe we possess a
competitive advantage in the Food and Consumables categories based on our sourcing capabilities for closeout
merchandise. Manufacturers and vendors have closeout merchandise for a variety of different reasons, including other
retailers canceling orders, other retailers going out of business, marketing or packaging changes, or a new product
launch that has underperformed. We believe our vendor relationships along with the size and financial strength of our
company afford us these opportunities. Supplementing our closeout strategy, we have expanded and improved the
consistency of our offerings in these categories. During 2014, in direct response to our consumer research findings,
we expanded the amount of square footage allocated to Food and Consumables in our stores, enabling us to offer more
branded merchandise for sales on a daily basis. Additionally, we also decided to further expand our everyday
offerings by installing coolers and freezers in a significant portion of our stores. We plan to complete this program
around the end of the first quarter of 2015, resulting in approximately 1,300 stores being operational in the cooler and
freezer program.