Food and Consumables Help Big Lots in Q3

The reconfiguration of food and consumables categories at Big Lots helped the company achieve record-setting third quarter same store sales growth that surpassed the recent performance of leading grocers.

According to Big Lots CEO and President Bruce Thorn during the Q3 conference call with investors, "consumables comped up approximately 10% in the quarter with positive results across all departments except paper, where we were faced with inventory challenges early in the quarter. Food was up 1% in the quarter, a very good result considering the team had to transition a good part of the assortment for a pantry optimization initiative and the lack of a friends and family event, as compared to last year where food and consumables both over indexed during the event."

Net sales for the third quarter of fiscal 2020 totaled $1.38 billion, an 18.0% year-over-year increase. The retailer also posted a 17.8% increase in comparable sales, and sales growth from new and relocated non-comp stores, offset by a slightly lower store count year-over-year. Kroger, by comparison, recently reported that same-store sales without fuel in third quarter rose 10.9%, a deceleration from second quarter's 14.6% comp. 

"We registered our strongest ever third quarter sales comp,” said Thorn. “The incredible efforts of our associates in our distribution centers, our stores and our corporate headquarters continue to impress me week in and week out. Their commitment to serving our customers and keeping our stores and workplaces safe during this uncertain time has been on display daily and remains a key driver to our superior performance."

During third quarter, according to Thorn, “we continued the rollout of our Operation North Star strategies, including the re-configuration of our Food and Consumables categories and expanding our online merchandise assortment offering through the implementation of ship-from-store. These initiatives built on the success of other North Star-driven strategies, including the rollout of the Broyhill brand, the launch of our Lot and Queue Line programs across 750 stores, and the rapid scaling of our e-commerce capabilities. Finally, this year's holiday season is certainly unique, and our strategic decision to plan for early holiday shopping has paid off. Although we expect business to moderate given the elongated season, we are pleased with the strong start we have made to the fourth quarter."

Thorn, during the Q3 financials conference call with investors, also highlighted the retailer's omnichannel progress. 

"We have now rolled out ship from store capabilities to 47 initial stores strategically identified to ensure two day delivery to 90% of our customers across the country," he said. "For a cohesive experience online and in-store, we have integrated web and store capabilities to allow for seamless returns, pricing, consistency, and order visibility."

Pantry and food items also played a role in the retailer's Q3 success, he said.

"Pantry optimization launched this past quarter, and the rollout was complete at the end of September. As a reminder, this involves repositioning footage from food staples, to food entertainment and consumables, including cleaning products and health and beauty," Thorn said. "We're combining competitively priced national brands with an expanded assortment of close outs, all of which creates a significant value differentiation from the competition. Our earliest reads from pantry optimization are indicating that we are getting lifts in our consumables business, as well as the food categories where we expanded space for entertainment foods and coffee. This is partially offset by our exiting or reducing of less productive categories such as freezer, cooler, and cans, and pasta. More to come as this strategy continues to mature."

Big Lots reported net income of $29.9 million, or $0.76 per diluted share, for the third quarter of fiscal 2020 ended Oct. 31, which compares to the company's guidance, as provided on Sept. 29, of $0.50 to $0.70 per diluted share.

With 1,404 retail stores, Columbus, Ohio-based Big Lots is No. 46 on The PG 100, Progressive Grocer’s 2020 list of the top food and consumables retailers in North America.