This is a summary of the fourth quarter fiscal 2008 earnings call as presented by Big Lots, Inc.(BIG) on March 4, 2009
Management
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Chairman, President & CEO: Steve Fishman
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SVP & CFO: Joe Cooper
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SVP, Legal & Real Estate, General Counsel and Secretary: Chuck Haubiel
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VP, Strategic Planning & IR: Tim Johnson
Key Investors Issues:
- Record full year 2008 Income from Continuing Operations of $1.89 Per Diluted Share
- Net income was $151.5 million, or $1.85 per diluted share,
- The firm reported inventory turnover of 3.6 which was a record.
Full Year Highlights
- Income from continuing operations was $154.8 million, or $1.89 per diluted share,
- Record operating profit dollars of $255 million
- Cash Flow (defined as operating activities less investing activities) was $123 million
Fourth Quarter Highlights
The firm reported a loss from discontinued operations of $3 million compared to income from discontinued operations of $6.4 million in the same period 2007.
- The loss relates to 31 KB store leases, where Big Lots has liability as a result of KB again filing for bankruptcy protection in December 2008.
- Consumables, which is roughly 30% of the business has been the most stable category and comped up mid single digits.
Big Lots opened 21 new stores and completed the point-of-sale register system rollout.
- The firm began the process of designing and installing a new core IT infrastructure through SAP.
- Sales comps were down in the 3% range which was right in the middle of the guidance. - This was a continuation of the trends experienced in the latter part of September and October. The customer is focused on need-based product right now and is holding off until the last possible moment on bigger discretionary purchases.
Sales were $1.367 billion, compared to $1.412 billion for the same period last year.
- Comparable store sales decreased 3.2% as strength in electronics and consumables was offset by softness in more discretionary categories.
- Sales comps remained very consistent across the income demographics of the store base.
Operating profit dollars increased slightly over last year, even though total sales were up about 3%.
- Growth in operating profit dollars was possible due to expansion in the operating profit rate which finished at 9.7% of sales or 30 basis points higher than last year.
- This expansion was driven by an increase in the gross margin rate, partially offset by slight SG&A deleverage.
The gross margin rate of 40.4% was 70 basis points above last year''s rate of 39.7%.
- The increase to last year was due to a higher receipt IMU, lower freight cost and a lower shrink rate year-over-year, partially offset by an unfavorable mix impact as a result of higher sales and lower margin consumables and electronics categories.
- Total SG&A dollars were $419.4 million or down 2% compared to last year. The SG&A rate of 30.7% was 40 basis points above last year.
- This increase in the SG&A rate was expected and consistent with the guidance from early December as the deleveraging impact of the comp stores sales decline was partially offset by efficiencies in stores, distribution, transportation, and depreciation.
Net interest expense was $1.1 million compared to $2.0 million last year with the improvement of result of this year''s cash flow.
- Income from continuing operations was $81.8 million or $1 per diluted share, compared to $82.5 million or 93 cents per diluted share a year ago.
- The majority of the favorability was in gross margin with a penny or so coming in the tax rate as the 38.1% rate was at the low end of the guided range principally due to tax benefits realized from statute of limitation lapses and settlements.
- Gross margin favorability was largely due to better sell through in seasonal goods at lower mark downs, lower overall freight costs and favorable early shrink results
Inventory was at $737 million down 2% or 11 million compared to $748 million last year.
