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More change coming at Big Lots

Big Lots overcame a 2.2% same store sales decline at its U.S. stores to post better than expected second quarter earnings, but indicated full year profits could be below the prior year.

Sales at Big Lot’s, the nation’s leading closeout retailer with 1,514 stores, increased 0.6% to slightly more than $1.2 billion. Profits from continuing operations adjusted to exclude a one-time charge totaled $17.7 million, or 31 cents a share, better than earlier guidance in the range of 17 cents to 27 cents, but below the prior year’s second quarter profit of $22.1 million, or 36 cents a share. The 2.2% decline in same store sales at U.S. stores, was offset somewhat by a solid 8.3% increase at stores in Canada to yield a consolidated figure of negative 1.9% that was slightly better than the company’s forecast for a decline in the range of 2% to 4%.

The company indicated that its best performing category was seasonal which had a mid single digit positive comp, followed by the furniture category with strength in mattresses, upholstery and ready-to-assemble products. The food and consumables categories declined during the second quarter and while home, hardlines and toys experienced single digit declines and electronics declined in the low double digits.

Big Lot’s president and CEO David Campisi, coming off his first full quarter since joining the company earlier this year, said those he works with have been very candid about what is working and what is not and what the opportunities are going forward.

“Candidly, a lack of ‘customer first’ mentality has hurt the business,” Campisi said during a conference call. “The good news is our core customer still loves us. She brags about us, and we have a better understanding of who she is and how she shops.”

Merchandising, marketing and stores are the three areas Campisi said would be subject to his relentless focus and indications are considerable changes lay ahead.

“The differences between major merchandise categories are significant in terms of execution, inconsistent direction and how we market or communicate to our customer,” Campisi said. “Regardless of the category, when you walk a store, you will see examples of great value, but you will also see examples of us trying to be everything to everyone. It can be confusing to the customer and quite frankly, makes the business model more complicated than it needs to be.”

Going forward, the company will employ an “edit to amplify” merchandising strategy in which categories Big Lots isn’t known for are edited while those where the company is winning or is top of mind with core customers are amplified through additional inventory or selling space, according to Campisi.

He also indicated changes are coming to the company’s traditional approach to purchasing merchandise.

“Closeouts are an important part of our heritage, but if a closeout is not a meaningful brand or an item or category we are known for, it can be lost with the customer, lost in the store and not a good use of our cash,” Campisi said.