NEW YORK (Dow Jones)--In its biggest image-changing effort yet, Big Lots Inc. (BIG) has opened a store in an upscale area to appeal to higher-end consumers chaffed by the recession.
The company took a former Linens N' Things in a relatively affluent part of Columbus, Ohio, and is offering merchandise similar to that of its regular stores, but with edgier presentations, better lighting, wider aisles, greater in-store systems to communicate with customers and other tweaks.
The store is across from a mall whose tenants include Saks Inc. (SKS), Macy's Inc. (M), Brooks Brothers and Limited Brands Inc.'s (LTD) Victoria's Secret.
This is a major twist for Big Lots, which has image issues as a bargain bin retailer that typically operates in secondary locations with lower customer traffic.
"We're offering a higher standard of presentation here," said Tim Johnson, vice president of strategic planning, in an interview with Dow Jones. "We understand that this is a different type of customer that wants to be communicated with differently."
Big Lots wants to see if some of the measures it is testing in the concept store, which opened two weeks ago, can be applied to other locations. "We are very encouraged with results so far, but it is still very early," Johnson said.
The new Columbus store is part of Big Lots' betting that a well-defined strategy will change its stores' rummage-sale image and continue producing strong results like those the company reported on Thursday.
"Customer shopping patterns have likely changed, and discounts and saving money are likely here to stay," Chief Executive Steven Fishman said during a conference call with analysts.
And for Big Lots to capitalize, "It's all about better brands, better quality and better value," Fishman said.
Big Lots is generally continuing to improve how its stores look, and also cutting deals for better locations because of so many closings by retailers.
Big Lots is also upping the quality of its merchandise because many manufacturers are overstocked as other, higher-end, retailers pull back on inventories and are turning to Big Lots, which they have shunned in the past.
"People like to do business with people that pay their bills," Fishman said of new relationships. "We're more branded today than we've ever been before."
Big Lots has upped the quality quotient in areas including electronics, consumables and toys, he said.
The retailer is also expanding, having opened eight stores during the first quarter, the most it has over the first three months of a fiscal year since 2005. Plans call for a total of 45 new stores in fiscal 2009, with the number growing in upcoming years, Fishman said.
Big Lots posted a first-quarter profit of $36.2 million, or 44 cents a share, up from $34.5 million, or 42 cents a share, a year earlier. The company in March had forecast 34 cents to 40 cents.
On the heels of the results, Big Lots raised its fiscal-year forecasts, now projecting a profit of $1.85 to $1.95 a share with same-store sales flat to down 1%. The company's March view was a profit of $1.75 to $1.90, above analysts' then-expectations, on a same-store sales decline of as much as 2%. Big Lots on Thursday also forecast second-quarter earnings in line with Wall Street's views.
Shares are off 91 cents, or 3.9%, to $22.74 after opening with a gain. The stock faded with other retail shares as poor housing and mortgage performance data were reported during the morning.
COMMENTARY: I strongly recommend BIG LOTS. The chain offers branded merchandise from flat panel HD tv's to shampoo and everything in between. BIG LOTS prices cannot be beat. They have Target quality and a cut above the 99 cent stores.
Article courtesy of The Wall Street Journal
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