Big Lots builds upon its success with closeout furniture - Home - Big Lot's furniture represents about 11% of its total sales - Brief Article - Statistical Data Included

DSN Retailing Today,  August 12, 2002  

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Furniture has become a big deal at Big Lots, and it will continue to grow. What began as a modest experiment is being rolled out to just about all Big Lots stores that have the space, and to independently operating furniture units as well.

While presently in only about half of Big Lots stores, furniture now represents about 11% of total sales.

Big Lot's furniture programs had somewhat unusual roots, and actually began with Chuck Kidder, now the company's vp of furniture operations, leaving the company, where he held the post of corporate attorney. He went to work for a furniture retailer as general council. In the meantime, Big Lots was experimenting with furniture, but without a systematic plan.

Kidder returned to Big Lots to pair what he had learned in his time away with the experience executives at the closeout retailer garnered in their experiments. The result was a nascent furniture operation.

"We had 13 to 15 upholstery patterns, six to eight full dinette sets, an equal number of occasional tables, matching bedroom sets in five to six assortments and then a mattress program," Kidder said.

"At that point in time, it was a logical good/better/best program. Technically, we didn't have commission-based sales associates. We wanted to ensure self-serve, but customers can always rely on our associates for help. And this concept works.

"Today, we have a small assortment compared with traditional furniture stores. We try to keep simple, but still offer great value for customers at tremendous price points."

Big Lots continues to favor its traditional buying approach as it pursues the furniture business, attending markets in search of closeouts.

"I attend as many furniture markets as possible," said Kidder. "We focus on closeouts first, but look at anything that hits our margin requirements and delivers great value to our customers."

Even today, the lineup in Big Lots stores that carry furniture corresponds to that, thus far, successful model.

But it doesn't end there. Furniture manufacturers, for obvious reasons of investment, don't venture large furniture productions run without a sure customer, so closeouts aren't as readily available as in some sectors. However, the past few years have presented other types of opportunities that Big Lots has been able to capitalize upon, particularly in the Internet sector.

The Big Lots deal for Living.com's inventory offers some sense of the scope in the retailer's furniture operations. Big Lots purchased the inventory of bankrupt Internet home furnishings seller Living.com in June of last year.

Living.com began operating in 1998, but declared bankruptcy in 2000 as the dot-com bust took hold. Its inventory included furniture from name-brand manufacturers, such as Broyhill, Century, Thomasville, Lane, Natuzzi, Vaughan and Bernhardt, and included bedroom, dining room and living room furnishings.

Big Lots spent about $2 million on the inventory, selling it at 50% to 80% off recommended retail prices. The deal represented the second Internet buyout of furniture and home furnishings for Big Lots. Months earlier, Big Lots acquired Furniture.com's inventory after it hit the skids. The inventory purchased from Living.com was moved through Big Lot stores in Central Ohio in about two weeks.

When vendors and furniture retailers aren't providing inventory, Big Lots engineers its own. Big Lots' staff works with furniture manufacturers to produce items that the retailer can sell at the prices and margins it prefers. And that product is in keeping with today's trends, said Kidder, comparable in styling with what's available from major traditional and lifestyle furniture retailers, but at price points consistent with the closeouts Big Lots offers.

Big Lots customers like a deal, and the fact that the deals they see in furniture on one day may be gone the next tend to drive their purchases. "Our customer base is very value-oriented, however, they may perceive a value in a product despite price ranges from $50 to 1,600 items, especially if they perceive a quality and value they can't get somewhere else. You'd be amazed how our customers get money out of their pockets and spend it in Big Lots, where the average ticket is about $13 dollars. But we're giving them a tremendous piece of furniture for a great price. They appreciate it, and they're voting with their wallets."

In a Security and Exchange Commission filing, the company has attributed better results in fiscal 2001, in part, to a comparable store sales increase of 2%. Sales of furniture, home decor and consumables, along with incremental volume from conversion stores, drove the comp advance.

In a report, John Rouleau, a Wachovia Securities analyst, said recent comp gains aren't a fluke. "We believe that comparable store sales results could remain healthy throughout the remainder of 2002."

Big Lots' net sales grew to $3.43 billion last year from $3.28 billion a year earlier, a gain of 4.8%. Net loss was $20.2 million versus 380.7 million in fiscal 2001. Today, Big Lots operates 611 stores that offer furniture and 55 free-standing furniture outlets, a number that has been increasing.