Big Lots Gets Bigger on Private Label

Big Lots is on a tear, watching sales and margin rise as store brands become more of a central focus in stores. The closeout chain began expanding private label in the critical consumables category to offer a regular assortment of value-priced items in addition to unique deep-discounts lots of merchandise.

“Consumables' trends accelerated from Q1 to Q2 and comps were up in the mid-single digits,” said Big Lots President and CEO Steve Fishman. “We placed a tremendous amount of effort and focus on this category and the results over the last six months demonstrate how quickly our trend can change. Our assortments have become broader to offer the customer more selection at extreme value and savings.”

Big Lots sells closeout merchandise across a wide range of product categories including furniture, home décor, appliances, jewelry and toys. The chain has been expanding its assortment of consumables – food, health and beauty, plastics, paper, chemical, and pet supplies – to grow margin and offer a more complete shopping trip to customers. The Fresh Finds brand in grocery, Dakin baby care products and the Big Lots brand of paper products.

The retailer will continue to grow store brands through this year, and recently brought in a new executive -- Doug Wurl as executive vice president, merchandising -- to expand global sourcing. Wurl was most recently general merchandise manager at Sears Holdings in addition to stints at Macy’s and regional discounter Shopko.

For the quarter ended July 30, sales at Big Lots rose 2.2 percent to $1.17 billion. Profits have been harder to come by, however as same-store sales fell 1.5 percent and earnings declined $3.2 million to $35.7 million.

“From an execution standpoint, we know the marketing and presentation of the product in the store has improved,” said Fishman. “And in Q3, you will see new initiatives such as our Fresh Finds captive label, expansion and more prevalent signage of extreme value compared to pricing. We believe these efforts will help us to maintain the trends we are seeing in consumables.”

Big Lots has been a rumored takeover target but decided in May not to sell itself after bids from private equity firms came in lower than expected. Instead, the chain completed the acquisition of Canadian closeout retailer Liquidation World for $1.85 million, marking its first expansion outside the U.S. The deal closed July 18, and the 90-store chain is now called Big Lots Canada.

The company is liquidating older existing merchandise and inventory at Big Lots Canada stores is down more than 70 percent, according to Timothy Johnson, senior vice president. “We need to fill empty store shelves with great quality and extreme value merchandise. Lots of empty shelves and a fair amount of inventory that's in stores has aged and we're moving swiftly to liquidate.” And likely adding in more private label consumables as Big Lots replicates its U.S. model.