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Big Lots (BIG) Gains From Digital Strength, Core Business Growth

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Big Lots, Inc. (BIG - Free Report) has managed to stay afloat amid a tough retail landscape on the back of prudent operational strategies and omni-channel strength. Earlier this month, Big Lots reported fourth-quarter fiscal 2020 results, wherein it recorded sturdy growth in its core business. Markedly, shares of the Zacks Rank #3 (Hold) company have gained 49.4% in the past three months against the industry’s 1.3% decline.

Strong Growth Across Categories

For the fourth quarter, Big Lots reported comparable sales (comps) improvement of 7.9% on the back of strong growth in baskets across channels. The company witnessed double-digit comps growth across all categories other than food and seasonal. This aided the top line, which grew 8.1% year over year for the quarter.

Markedly, it has been witnessing growth in the sale of furniture, with the Broyhill brand performing exceptionally well. In the Soft Home category, the company has been witnessing growth in areas such as window, home organization and basic bedding. Furthermore, the apparel category continues to remain strong with sturdy sell-through in sportswear, graphic tees, fashion tops and cold weather fleece. In the Hard Home category, areas such as kitchen appliances, cookware, dinnerware and drinkware have been doing well. In Consumables, products across household chemicals, health and beauty, as well as food and beverages continue to grow.



E-commerce Wing Fares Well

Big Lots is experiencing strong e-commerce growth, buoyed by success of the “Buy Online Pick-up In Store” (BOPIS) functionality. Notably, BOPIS has helped the company to increase the rate of orders. Markedly, during fiscal 2020, it introduced curbside pickup, same-day delivery in partnership with Instacart and same-day delivery with with pickup. The company’s delivery services continued to accelerate during the fourth quarter, making a significant contribution to overall e-commerce sales. We note that e-commerce and omni-channel platforms grew more than 130% year on year and contributed 300 basis points (bps) to overall comps in the fourth quarter.

Business Transformation on Track

The company has been gaining from the transformation initiative, referred to as Operation North Star, which encompasses driving top-line growth, cost containment, and enhancement of systems and infrastructure. Additionally, it is focusing on boosting assortments and strengthening customer services. Speaking of Lot and Queue Line programs, management plans to roll-out the same across additional stores in 2021, given their success in 2020.

Further, the company is on track with pantry optimization efforts, which include repositioning footage from food staples to food entertainment. It also includes allotting the expanded space for consumables, including cleaning products and health and beauty. Moreover, the strategy incorporates combining competitively-priced national brands with an expanding assortment of close-outs. Also, the company is focusing on optimizing floor space available in stores through the Queue Line project. Additionally, it is on track to optimize its store base, in which the Store of the Future strategy is an important part.

Wrapping Up

We note that Big Lots has been grappling with soft store traffic, thanks to the pandemic. In addition, supply chain and inventory-related disruptions, alongside higher expenses associated with the pandemic have been headwinds.

Nevertheless, efficient business growth endeavors including efforts to boost online sales are likely to keep aiding the company in the forthcoming periods. In fact, management expects low single-digit rise in comps for the first quarter of fiscal 2021.

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L Brands, Inc. (LB - Free Report) , flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 13%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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