Big Lots, Inc. (BIG)

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Big Lots (BIG)

Q4 2011 Earnings Call

March 02, 2012 8:00 am ET

Executives

Andy Regrut -

Steven S. Fishman - Chairman, Chief Executive Officer and President

Timothy A. Johnson - Senior Vice President of Finance and Vice President of Strategic Planning & Investor Relations

Joe R. Cooper - Chief Financial officer, Executive Vice President, Principal Accounting officer, Treasurer, Interim Treasurer and President of Big Lots Canada

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

Analysts

Charles X. Grom - Deutsche Bank AG, Research Division

Matthew R. Boss - JP Morgan Chase & Co, Research Division

Daniel R. Wewer - Raymond James & Associates, Inc., Research Division

John Zolidis - Buckingham Research Group Incorporated

David M. Mann - Johnson Rice & Company, L.L.C., Research Division

Jeffrey S. Stein - Northcoast Research

Anthony C. Chukumba - BB&T Capital Markets, Research Division

Bradley B. Thomas - KeyBanc Capital Markets Inc., Research Division

Patrick McKeever - MKM Partners LLC, Research Division

Peter J. Keith - Piper Jaffray Companies, Research Division

Meredith Adler - Barclays Capital, Research Division

Presentation

Operator

Ladies and gentlemen, welcome to the Big Lots Fourth Quarter 2011 Teleconference. This conference is being recorded. [Operator Instructions] At this time, I'd like to introduce today's first speaker, Director of Investor Relations, Andy Regrut. Please go ahead.

Andy Regrut

Thanks, Cindy, and thank you, everyone, for joining us for our fourth quarter conference call. With me here today in Columbus are Steve Fishman, our Chairman, CEO and President; Chuck Haubiel, Executive Vice President, Real Estate, Legal and General Counsel; Joe Cooper, Executive Vice President and Chief Financial Officer of Big Lots and President of Big Lots Canada; and Tim Johnson, Senior Vice President of Finance.

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 our Safe Harbor provisions, as stated in our press release and SEC filings, and that actual results can differ materially from those described in our forward-looking statements. Our consolidated financials include results of our U.S. operations and our Canadian business since acquisition or July 18, 2011. Our statements also include immaterial amounts of discontinued operations activity. All commentary today is focused on continuing operations.

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

Steven S. Fishman

Thanks, Andy, and good morning, everyone. I'm pleased with the results we're reporting this morning. Our fourth quarter was a success as we executed our strategies extremely well over the holiday season, maybe better than we ever have before. And it generated strong financial results. Comps in the U.S. were up 3.4%. And operating profit in the U.S. and EPS were at record levels, and we continue to return significant amounts of cash to our shareholders through our share repurchase efforts.

From a merchandising perspective in the United States, our Seasonal and Furniture businesses were particularly strong, each comping up in the low double digits. You may recall that our Seasonal Christmas assortment was allocated more floor space and inventory this holiday season, a result of our strategic decision to downsize our traditional Toys business. We offer great quality Seasonal product, all priced at extreme values, and the customers responded in a big way.

In Furniture, all of our key classifications posted positive results. This year, our broader selection of decorative fireplaces appealed with the consumers. We experienced strength in Upholstery, which is often used to spruce up the house for the holidays, and our day-in and day-out Mattress business posted some of the strongest comps in the store. Consumables had another successful quarter, comping up mid-single digits. We made significant improvements in this business in 2011 with our merchandise, with planned events and our team and the changes have translated into meaningful sales growth. Our Food business, whether it was closeout, specialty or captive label, continues to drive Consumables. However, HBC, pet, chemicals and most every part of the category had positive comps for the quarter.

Our marketing, product presentation and in-store execution, including the wall of values that highlights the extreme value of our Consumables offerings, steadily improved as the year went along. The other big winner for the holidays was Electronics, which you may recall also benefited from our efforts to downsize Toys. Electronics are the Toys of the new age, toys with screens and memory cards. They're gadgets that fascinate a tech-savvy generation, have a broad appeal to consumers of all ages and create buzz in our stores and with our customers. What's most exciting about this strategy is that Electronics is not just a fourth quarter business but instead has growth opportunities throughout the year.

From a Canadian perspective, we made progress over the last 90 days to its 3 key initiatives, which Joe will cover shortly. Having been in Canada and visited stores during Q4, I can tell you that the presentation shopping experience has significantly improved, and I believe we are on the right track.

For the year in total, 2011 was one of significant milestones. We exceeded $5 billion in sales for the first time in our company's history. We delivered our fifth consecutive year of record earnings per share at $2.99 per share. We posted flat or positive annual comps for the 13th consecutive year. We completed a key strategic acquisition and expanded into Canada. We executed a successful IT rollout of a new merchandising systems, a multiyear, multimillion dollar cross-functional initiative that officially went live on January 29, without issues and on budget. We invested in our associates through a variety of training and development programs designed to increase our bench strength and prepare our workforce for future growth opportunities, both in the corporate offices and in the stores. And through all of this, our shareholders experienced meaningful financial gains as our share price increased 26%, which we believe was due to our performance and significant share repurchase efforts. I think it's safe to say we're pleased with the improvements we made this year, but we're not satisfied.

Before I go on to 2012, let me turn the call over to TJ for additional details on the fourth quarter and full year results.

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