Big Lots CEO Outlines Key Strategies for Post-Bankruptcy Turnaround
Three days after Big Lots announced a Chapter 11 restructuring and acquisition by Nexus Capital Management, Big Lots President and CEO Bruce Thorn offered an overview of the company’s performance and strategic direction during the second-quarter earnings call Thursday (Sept. 12).
Second-quarter comparable sales fell 14.6% in a “very challenging environment,” Thorn explained, “in which our core lower-income customer remains under significant pressure and has limited capacity for higher ticket discretionary purchases.”
For the past 18 months, Thorn said, “we’ve been playing defense as the consumer environment quickly and sharply deteriorated.” The situation has been impacted by high inflation, he noted, “which has disproportionately affected lower-income consumers, leading to reduced spending on discretionary items, especially in high-ticket home and seasonal categories.”
Thorn discussed three main points: the company’s current challenges, sequential improvements and firm financial positioning that supports its turnaround efforts, which have been dubbed “Project Springboard.”
Thorn noted that the company has struggled with a furniture product shortage due to the unexpected closure of a key supplier. Despite these issues, Thorn expressed optimism about the future.
“While the consumer environment will likely remain challenging and result in negative comp sales in the back half of the year, we are now in a position to get back to playing offense,” he said. “This will be supported by the incredible efforts of our associates and our outstanding vendor partners, who remained aligned with our efforts to offer great quality products and amazing value.”
Thorn also highlighted the company’s progress.
“We did see some sequential improvement in the quarter, and we were pleased to come in ahead of or in line with our beginning of quarter guidance on all key metrics,” he said. “We believe this improvement was driven by the five key actions we have outlined on prior calls.”
These actions are:
- To Own Bargains: “We took a huge leap in providing value as our mix of bargains, which are close-out items and other source products where we have significant comparable price advantage was nearly 30% in Q2, putting us well on track to exceed our goal of over 1/3 by the end of the year,” Thorn said. “We’re making great progress on our bargains penetration.”
- To Communicate Unmistakable Value: “Our recent marketing efforts continue to bear fruit,” he explained. “Customers are recognizing our bargain offers and improved pricing.”
- To Increase Store Relevance: “We are continuing to flex our assortment by increasing food and consumables inventory in stores where category demand is strong,” he said.
- To Win with Omnichannel: “We achieved a Net Promoter Score consistently in the mid-80s range in Q2, which is up from the prior year and top tier in the industry,” Thorn noted.
- To Drive Productivity: “We continue to make progress in refining our customer segmentation and messaging by focusing on our best customers with our most attractive offerings,” he added.
Thorn also expressed confidence in these actions driving future improvement, aided by a gradually improving macro environment.
“Our confidence also stems from our belief that we have the right ingredients for success with the right strategy and the right team in place to make it happen,” he said. “I continue to be impressed by our associates who have worked hard and demonstrated tremendous grip during the challenging time.”
“We have a robust balance sheet to carry us through this turnaround,” Thorn said, citing the completion of a $300 million sale-leaseback and ongoing cost reduction in capital management.
He detailed that the sale-leaseback transaction, completed on Friday (Sept. 6), significantly strengthened the company’s balance sheet.
“Combined with our efforts to aggressively manage costs, inventory and capital expenditures, we are prepared and positioned to navigate through the current economic challenges,” Thorn said.
Big Lots is on track to achieve structural SG&A savings of over $100 million in 2023 and is targeting an additional $200 million in savings through partnerships and efficiency improvements, he noted.
“Project Springboard, as we now are calling these efforts, is up and running, and we expect a high proportion of these benefits to be realized on a run rate basis by the end of 2024,” the CEO said on the call.
By focusing on owning bargains, communicating unmistakable value, increasing store relevance, winning with omnichannel and driving productivity, Thorn said the company is making strides toward recovery.
“We met with over 600 of our allies at our Vendor Summit in July and had tremendous support and dialogue around where we are going as a business,” he said. “As it relates to communicating unmistakable value, our recent marketing efforts continue to bear fruit. Customers are recognizing our bargain offers and improved pricing. We held the first friends and family events since 2019 in June and offered exclusive eCommerce promotions in July that drove incremental sales. Our clearance events over the course of the quarter were also successful in rightsizing our seasonal inventory levels. We continue to emphasize comparable value for our bargain offers.”
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