Big Lots, Inc. (BIG)

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Big Lots (BIG)

Q4 2011 Earnings Call

March 03, 2011 8:00 am ET

Executives

Joe Cooper - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Interim Treasurer

Charles Haubiel - Executive Vice President of Legal & Real Estate, Corporate Secretary, General Counsel and Member of Executive Committee

Steven Fishman - Chairman, Chief Executive Officer and President

Timothy Johnson - Vice President of Strategic Planning & Investor Relations

Analysts

Peter Keith - JMP Securities LLC

Joseph Feldman - Telsey Advisory Group

Meredith Adler - Barclays Capital

David Mann - Johnson Rice & Company, L.L.C.

Daniel Wewer - Raymond James & Associates, Inc.

Mark Mandel - ThinkEquity LLC

Patrick McKeever - MKM Partners LLC

Anthony Lebiedzinski - Sidoti & Company, LLC

John Zolidis - Buckingham Research Group, Inc.

Jeffery Stein - Soleil Securities Group, Inc.

Laura Champine - Cowen and Company, LLC

Presentation

Operator

Ladies and gentlemen, welcome to the Big Lots Fourth Quarter 2010 Teleconference. [Operator Instructions] At this time, I would like to introduce today's first speaker, Vice President of Strategic Planning and Investor Relations, Tim Johnson.

Timothy Johnson

Thanks, Dave, and thank you, everyone, for joining us for our Fourth Quarter Conference Call. With me here in Columbus today are Steve Fishman, our Chairman and CEO; Joe Cooper, Executive Vice President and Chief Financial Officer; and Chuck Haubiel, Executive Vice President Real Estate, Legal and General Counsel.

And before we get started, I'd like to remind you that any forward-looking statements we make on today's call involve risks and uncertainties and are subject to our Safe Harbor provisions, as stated in our press release and our SEC filing, and that actual results can differ materially from those described in our forward-looking statements.

As highlighted in this morning's press release, our Q4 2009 results contain one item, and full year fiscal 2009 results contain two items in continuing operations that we believe were not directly related to the company's ongoing operations.

We have provided non-GAAP reconciliations for both the fourth quarter and the full year fiscal 2009, and those schedules are attached to today's press release. Since we do not view these items as relevant to the ongoing operations of the business, the balance of our comments and comparisons between 2010 and last year's results will be based on 2009 non-GAAP results from continuing operation.

With that, I'll turn it over to Steve.

Steven Fishman

Thanks, T.J., and good morning, everybody. In terms of merchandising, the best-performing categories continue to be our discretionary higher-ticket businesses. Furniture, Home and Seasonal each posted mid-single-digit comps, again, some tough comparisons from a year ago. We're very encouraged by the continued strength in our Furniture business, up against double-digit comps and especially given the fact that there have been changes in tax refund loans and the corresponding impact on our January business.

Although it may not seem like a holiday or Christmas business, we continue to find additional opportunities to drive Furniture during Q4 in the holiday time period. We're well-positioned heading into 2011, and I continue to believe that Furniture may be one of the largest growth opportunities we have for the future.

Seasonal Christmas trim performed well during November and December, particularly in lighting and trees, where our how high is high strategies delivered upside sales and margin dollars. The merchant team delivered extreme value and great quality and the customer responded. This is an encouraging sign when we look forward to spring and our opportunities in Lawn and Garden. Also in the discretionary part of our business, our Home category was a leader in the store. Newness and better quality goods and deeper inventory levels for key items worked well for us this holiday season.

In contrast, other parts of our business were off to last year, namely Consumables and Toys. As anticipated, our Consumables business comped down to last year. On our last call, I indicated to you that I believe we were not executing up to our full potential, and that we were working quickly to get this business back on track.

I like what I'm seeing in recent weeks. The phones have been lively of late with deals and some of the new programs we've been developing should start to appear in stores later in Q1 and Q2. So although we have seen some encouraging signs, real change will take some time on into the first half of 2011.

Our Toy business was challenged during the holiday season, as it appears to have been for most major discount retailers. It was very competitive from a pricing standpoint, which is not unusual, but in my view, this was not our issue. Our customers continue to shop toys differently each year, and we need to change both on our approach and our assortment. As you've heard me say on a number of occasions, if we're not changing, we run the risk of falling behind. We'll execute a different toy strategy for next holiday; that I'm confident of.

We took a major step forward in Q4 and in 2010 in both the pace and quality of new store openings. As Chuck will touch on in a moment, the productivity of our recent new store openings make this a key part of our long-term potential of this business.

From a stores perspective, it was our best executed holiday season yet. Our ready-for-business initiatives have improved the shoppability of our stores and, hopefully, left a more favorable impression of Big Lots to encourage more frequent visits from our customers.

In terms of marketing, we continue to test and learn from our Buzz Club Rewards program, which now totals over 7 million members. In summary, we were pleased with the outcome of Q4 in a difficult environment. Total sales for Q4 of over $1.5 billion, representing an increase of nearly 4% driven by the strength of our new stores. We generated record operating profit of $177 million. We achieved record earnings per share of $1.46 per diluted share, an increase of 11% over last year's record performance. We successfully opened 27 new stores, bringing us to a total of 80 new stores for the year. And we managed our business very prudently and ended the year with over $175 million of cash and no debt.

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