Dive Brief:
- Big Lots is making accelerated progress on its pivot to procure more closeout product as it tries to rebuild its sales and margins in a difficult environment.
- Bargain products — including closeout acquisitions, opportunistic buys and other sourced products — were nearly 60% of sales in Q4, “far exceeding” the retailer’s goal of one-third by the end of 2023, President and CEO Bruce Thorn said on the retailer’s fourth-quarter earnings call last week.
- “We achieve this by procuring products from over-inventoried and distressed retailers and vendors, and through new factory direct sourcing partners domestically and overseas,” Thorn said. “Our next phase is to grow bargains to 75% of our sales, and within that, have an expanded assortment of extreme bargains.”
Dive Insight:
Procuring low-cost goods to sell to consumers at “extreme bargain” prices is one of the linchpins in Big Lot's strategy as the retailer tries to rebound from steep sales and profit declines.
In November, the company hired of Seth Marks as SVP of extreme value sourcing. Marks came from the liquidation specialist Hilco Global, which has deep roots in the world of inventory disposal and closeout acquisitions.
Big Lots has long sourced from closeout situations such as production overruns, packaging changes, discontinued products, order cancelations, liquidations, returns and other disruptions in the supply chains of others. Now, the retailer is looking to make that inventory an even larger part of its path forward.
The retailer already has some big acquisitions to show for its effort. In February, Big Lots announced it had acquired the entire inventory of toy brand Hearthsong, valued at over $22 million. On the call, Thorn described the opportunity as a foreclosure sale made without an intermediary. Big Lots now plans to sell the Hearthsong inventory to customers at 50% to 70% less than original retail prices.
“This acquisition has been instrumental in accelerating the extreme value sourcing and cross-organizational execution process for scale,” Thorn said.
Broadly, the retailer is “pushing hard on sourcing more extreme bargains across our categories,” the chief added. Big Lots recently procured a “large branded consumables closeout,” with inventory making it to stores in January, according to Thorn.
“We have made buys from several branded furniture and home furnishings manufacturers as well, which will add more newness and excitement at exceptional prices,” he added.
Time will tell whether the company’s strategy pans out. For the full fiscal 2023, its sales plummeted by 13.6% year over year. Deep bargains could make it more price competitive with other discount retailers.
Big Lots is “not always particularly good value for money,” GlobalData Managing director Neil Saunders said in emailed comments. “Many of the items it sells are not high end and are not drastically expensive, but equivalents can often be found much cheaper at stores like Target and Walmart,” Saunders said, adding that “even in essentials categories, Walmart is usually a few cents cheaper than Big Lots.”
