Big Lots is going country

Photo: Big Lots
Dec 09, 2022

“Green Acres is the place to be.
Farm livin’ is the life for me.
Land spreadin’ out so far and wide
Keep Manhattan, just give me that countryside.”

Big Lots is looking to leave the city life behind as it sees plenty of opportunities to grow in places with wide open spaces.

“We will increasingly focus on rural and small town markets where we know we outperform with our strong assortment of furniture and home goods, while taking a prudent near-term approach to opening stores,” Bruce Thorn, president and CEO of the retailer, told analysts on the company’s third quarter earnings call. “Overall, new stores continued to perform with strong performance in rural and small town markets. In these markets, we face less direct competition in our home categories and have a lower cost structure. Therefore, these typically generate more cash and profitability than urban stores. As we think about our real estate strategy in store openings and closings in the future, we see an opportunity to reshape our store portfolio more towards these rural and small town markets with an emphasis on furniture and home goods.”

The discounter will need to find some answers that go beyond rural markets and small towns coming off a third quarter for which it reported a net loss of $103 million or $3.56 a share. The chain’s same-store sales fell 11.7 percent year-over-year. New and relocated stores added 190 basis points of growth.

Mr. Thorn said that Big Lots customers have pulled back on higher ticket discretionary purchases and focused their buying on staples. He said that the chain is making progress in adjusting its assortments and promotions to meet the needs of its low-income customers and discourage them from shopping elsewhere.

Big Lots, according to Mr. Thorn, has made progress simplifying and communicating its value offerings to its customers. The chain is also looking to leverage its scale and work more closely with trading partners “to deliver compelling opening price points” across product categories and segments.

“Through cost engineering and using our scale and relationships with suppliers, our opening price points in furniture are now at pre-COVID levels across more than 60 percent of SKUs,” said Mr. Thorn. “We expect nearly all of our furniture to see price revision in Q1 2023.”

DISCUSSION QUESTIONS: Will a greater emphasis on operating stores in small towns and rural areas and away from more competitive urban markets prove successful for Big Lots? What will Big Lots need to do in merchandising and marketing to turn its negative trends positive?

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"Both Walmart and Dollar General make a good living from trading in more rural areas and I expect, albeit in a more limited way, Big Lots can do the same."

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4 Comments on "Big Lots is going country"

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Neil Saunders

Now isn’t a great time for Big Lots as its core categories are under pressure both because of tough prior year comparatives and because consumers are cutting back on discretionary items. However that aside, there is an opportunity in rural areas which are underserved in retail terms. Both Walmart and Dollar General make a good living from trading in more rural areas and I expect, albeit in a more limited way, Big Lots can do the same.

Dave Bruno

I used to have a client that built their business around putting in small “general store” locations in Walmart’s backyard in rural America. They eventually folded, but I believe the issue was assortment-driven. If Big Lots can become a viable, easy-to-shop and convenient alternative to Walmart, with unique items and “treasure hunt” opportunities that complement the staple categories, I think this strategy could work.

Richard Hernandez

It gives Walmart, Dollar General, and Family Dollar some competition. They will have to be careful to be unique in assortment and other ways so they are not a “me too” copy of what is already in the market. Tractor Supply has also began to re-imagine their stores and may become a more serious competitor in those rural markets.

Craig Sundstrom

Well Mr. Thorn certainly thinks so; the question, really, is do we believe him? There was a lot of talk about low cost and lack of competition, but very little about the other side of the equation … i.e. revenue (many times there’s a reason why you don’t have competitors). I’m going to go contrarian on this and say “meh.”

"Both Walmart and Dollar General make a good living from trading in more rural areas and I expect, albeit in a more limited way, Big Lots can do the same."

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