Big Lots DC opens S.W. opportunities

DSN Retailing Today, June 21, 2004 by Debbie Howell

DURANT, OKLA. -- The grand opening earlier this month of a new distribution center for Big Lots, the nation's largest closeout retailer, translates into much more than efficiently servicing stores in southern and central states. For this fast-growing value retailer, the DC equates to the next phase in an ambitious expansion plan.

"This facility will be an integral part of our plan to add perhaps over 1,000 stores over the next 10 to 15 years, as our business continues to grow," ceo Michael Potter told a crowd of about 200 local dignitaries gathered for the June 8 opening in Durant, Okla.

Big Lots operates more than 1,450 stores, lacking a presence only in the states of South Dakota, Rhode Island, Alaska and Hawaii. The bulk of stores are concentrated in the East and West, leaving the central and southern sections of the country primed for expansion and fill-in opportunity, including a greater presence in Texas.

The new $70 million DC in Durant initially will service 125 Big Lots stores in Oklahoma, Texas, New Mexico and Colorado, with ability to accommodate up to 400 stores. Potter foresees the center will take care of the chain's growth plans for the next five years, at which point a sixth DC will be needed. Big Lots has been opening 90 stores a year, with a long-term goal of growing to 2,500 units in the United States.

Covering 1.2 million square feet, the DC features state-of-the-art systems, including a conveyor that can sort 235 cartons per minute, the fastest of its kind. Big Lots uses automatic replenishment systems to keep product flowing smoothly to stores weekly.

"We are a low-cost retailer and low-price retailer, so we have to keep our costs as low as possible and the payback high," Potter told DSN Retailing Today, explaining that an efficient distribution system is key to keeping those costs in line.

Before the Durant facility opened, stores in the region received shipments from DCs in California, Alabama or Ohio. The reduction in distribution mileage and related savings are therefore significant now that the fifth center is up and running.

"It's a fun time right now because we're transitioning from reinventing ourselves to growing the business," Potter told DSNRT.

Part of that growth and maturity phase includes refinement of the merchandise mix. Furniture has evolved into a strong performance category for Big Lots, with plans to retrofit 200 stores this year with furniture sections. By year-end, about 75% of Big Lots stores will offer furniture departments, Potter said.

Another change is the phase-out this year of hanging apparel, which Potter described as a challenging category. He said Big Lots would continue to sell basics, such as socks and underwear, and offer deals in apparel items like leather jackets.

For the fiscal year ended Jan. 31, 2004, revenue grew 7.9% to $4.17 billion, with comparable-store sales rising 3.4%. This comp gain, based on stores open at least two years, is divided equally between increases in the number of transactions and the value of the average basket.

The celebratory nature of the grand opening reception in Durant, complete with a confetti-exploding prop, seemed fitting given growing customer affinity for extreme-value retail formats, from dollar stores to closeout chains such as Big Lots.

Potter said the rapid growth of such formats is "showing you what customers want today. They want to save money and they want a deal." All of which, of course, equates to more business and more success for retailers like Big Lots.