Home discount retailer Big Lots is returning to expansion mode after more than a decade of flat store growth, with plans to open as many as 500 new stores in the next six to seven years.
Big Lots currently operates 1,431 stores across the U.S. The off-price chain plans to open approximately 50 net new stores this year, and ramp up the pace of expansion to about 80 stores per year thereafter. The retailer unveiled its plans at a recent investor meeting and said it will target “under-penetrated geographies” for the new locations, in particular rural and small-town markets.
The expansion is part of Operation North Store, the Big Lot multi-year transformation plan launched in 2019 that aims to drive annual sales up into the $8 to $10 billion range through a combination of enhanced sales productivity, ecommerce growth and new store openings. Over the last 12 months (as of January 2022), the retailer brought in $6.2 billion in sales.
“We are highly confident that Operation North Star has put us on track to create tremendous long-term value for shareholders, and that we now have the visibility to provide a long-term financial outlook,” said Bruce Thorn, President and CEO of Big Lots in a statement. “We see a clear and long runway for growth ahead of us, coupled with the opportunity to drive returns through margin expansion and judicious capital allocation. We have all of the foundations in place to accomplish this, including a seasoned and ambitious team, new tools and technologies and a proven pipeline of innovation.”
Among the productivity drivers that the company hopes will increase operating margins to 6% to 8% are assortment optimization, an expansion of its apparel offerings, growth in the owned brands category and the rollout of its “Next Gen Furniture Sales model” at more than 500 stores.
On the digital side of the business, ecommerce sales have quadrupled since 2019, but Big Lots executives pointed out that it still has less than 5% ecommerce penetration. The company is aiming for 10% to 15% penetration, which would represent a $500 million to $1 billion opportunity in terms of sales growth. The retailer plans to accomplish this goal with an overall enhancement of its ecommerce experience through personalization, search improvements, simplified checkout, the addition of financing options and the rollout of nationwide same- and two-day delivery. Big Lots also plans to accelerate its direct fulfillment program with suppliers in order to expand its assortment, hinting at a potential third-party marketplace play.
At the investor meeting, Big Lots also provided an update on results for Q4 of fiscal 2021. Through the end of December 2021, the company’s performance was at the upper end of its expectations with a two-year comparable sales increase of approximately 9%. The company did note that since early January it has seen a softening of traffic and sales, which it attributes to weather and the spread of the Omicron variant of COVID-19.