by As furniture remains a core category, other value-oriented retailers could reap benefits in communities where closings will occur
COLUMBUS, Ohio — In revealing its plans to close 35-40 of its stores this year, Big Lots appears to be addressing the challenges of how to deal with underperforming assets at a time when many other companies are or perhaps should be doing the same thing.
It’s a move that will reduce the retailer’s footprint from 1,392 locations by the end of its first fiscal quarter ended May 4 to 1,352, not including three new stores planned to open during the year. This compares to 1,427 locations at the end of the same period last year.
With stores in 48 states, Big Lots remains among the top furniture retailers in the country, placing at No. 17 on our own list of 125 Furniture & Bedding Retailers for 2023, despite the decline in store count.
This year, the ranking could change given the number of store closings, but it will likely still have a place high on the list depending on how it weathers its own financial challenges, not the least of which are declines in sales, net losses exceeding $205 million for the first quarter, plus total debt of $578.6 million, up from $409.1 million the same period last year.
It’s not clear how much the store closings will help the company’s bottom line as they represent less than 3% of the total store footprint. But overall sales, including furniture sales, will take a hit at least over the short term, while potentially giving competitors a slight boost in the markets where the stores close.
The company’s furniture sales will be on the industry’s radar regardless of the outcome. For the first quarter alone, furniture sales held up better than most other categories, a bright spot for the industry given that it’s been one of the worst performing retail segments tracked by the U.S. government each month of late.
During the first quarter, it was the retailer’s single largest category, representing about 29% of sales overall — compared to 27.7% the same period last year — no surprise given it’s the biggest ticket item on the floor.
But sales in the segment also only fell 6.6% compared with a 10.2% decline in overall sales, a 9.2% decline in seasonal merchandise including outdoor furnishings, a 10.5% decline in consumables (health, beauty, paper goods, cosmetics, infant, pet, stationary and chemical items), a 12.6% decline in soft home (apparel, hosiery, jewelry, frames, fashion bedding, utility bedding, bath, window, decorative textiles and area rugs), a 12.8% decline in food and a 14% decline in hard home (small appliances, tabletop, food preparation, home maintenance, home organization, toys and electronics).
It also was the best performing segment in terms of same-store sales with a 5.6% decline compared with an overall 9.9% decline, which factors in declines of 7.9% in consumables, 10.2% in food, 11.3% in soft home, 13.7% in hard home and 15.2% in seasonal merchandise.
The company noted that both its furniture and seasonal categories “continue to be impacted by a decrease in demand for large-ticket products as customers remain cautious with discretionary spending.”
That said, it added, that while furniture experienced a drop in comps and net sales in the first quarter, the category performed “relatively better than other home product categories in the first quarter of 2024, due to Broyhill branded products returning to normal in-stock levels as compared to the shortage we experienced in the first quarter of 2023,” which it said was related to the closure of its largest Broyhill brand supplier, a reference to United/Lane.
Regardless of the category, the decline in sales across all segments is a sign of the challenges that the retailer faces with a customer base that’s also struggling because of economic factors, ranging from food to health care costs and even job losses.
As we’ve reported previously, Big Lots has a plan in place to address this issue with an extreme value proposition that aims to drive traffic and sales through promotions that are even more aggressive than ever. Unfortunately, despite such values offered at stores like Big Lots, sometimes a great deal just isn’t enough to justify spending on a big-ticket item like furniture, a purchase that can often be postponed.
It appears the store closures are a necessary step to help shore up its business at least in the short term. But as the economy improves, other furniture retailers will likely swoop in for that business, if for no other reason than to support their own store growth plans.
Will Big Lots be able to compete in that environment, at least in a way that supports its ever-important furniture category? Let us know what you think by responding to this story or emailing Tom Russell at tom@homenewsnow.com.
