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Big Lots (BIG) Appears Strong on Omni-Channel Initiatives

Shares of Big Lots, Inc. BIG have jumped 41.4% in the past six months, thanks to the company’s impressive omni-channel initiatives.

The company is experiencing strong e-commerce growth, buoyed by the success of the “Buy Online Pick-up In Store” functionality and curbside pickup. Further, its store-growth strategies are consistently contributing to its performance. Also, the company’s same-day service at Instacart and Pickup seems profitable. Encouragingly, this Columbus, OH-based company has outperformed the industry’s 8.2% increase in the past six months.

Robust Omni-Channel Measures

Big Lots is leaving no stone unturned to tap the best in the market, which is evident from its efforts to leverage marketing strategies with loyalty databases and e-commerce enhancement. The company is focused on enriching the omni-channel experience, removing friction and expanding customer base. Management also integrated web and store capabilities to drive improved returns, pricing, consistency and order visibility. It further rolled out ship from store capabilities to 55 outlets identified for a two-day delivery.

Apparently, the company’s e-commerce business surged 30% during the first quarter of fiscal 2021. Moreover, its Rewards program achieved a record high of 21.4 million members, growing 12% year over year in the quarter. More than 72% of quarterly sales came from rewards membership, reflecting growth of 800 basis points year over year. The company witnessed continued increases in traffic and conversion. Also, e-commerce demand saw progress in both the Furniture and Seasonal lawn & garden businesses.

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Meanwhile, Big Lots’ Store of the Future and new stores strategy are worth a mention. The company has also been enhancing its in-store experience for a while now. For instance, given strength in its furniture assortment, management is consistently testing new sales and staffing model in about 35 stores. Good news is that it is seeing steady double-digit sales growth across such stores. Thus, it remains on track to expand the program to a broader group of pilot stores in the next few months with the potential to roll out meaningfully in fiscal 2022.

For fiscal 2021, management anticipates opening about 50-60 stores, of which 20 will be relocations. Simultaneously, it plans nearly 15 outright closures in the fiscal year. For the rest of fiscal 2021, the company is committed toward expanding its wings from store capabilities to eight additional sites, thus augmenting the total to 55 in time for holiday.

What Else?

Big Lot’s transformation initiative, referred to as Operation North Star, also bodes well. The strategy focuses on driving the top line, and enhancing its systems and infrastructure. This initiative also aims at streamlining the company’s cost structure. Evidently, the company had been managing SG&A expenses efficiently so far and is on course to deliver and surpass $30 million of structural expense savings in fiscal 2021. This will bring its cumulative savings under Operation North Star to more than $130 million. Also, the company is continuing to pursue its pantry-optimization efforts.

Moreover, it has been enhancing its assortments. Recently, Big Lots came up with a host of attractive deals and assortment options from renowned brands including Reebok as well as private-label and new brands. It unveiled a broader range of apparel encompassing active and athleisure wear, which include hoodies, joggers, sweaters, athletic shorts and more. Further, the company introduced various comfortable wear for summers, footwear and accessories from Como Vintage, Weekend Soul and Zac & Rachel labels. Customers can now avail of the company’s assortment options from any of its stores, nationwide as well as online. In fact, the company looks to offer stylish and affordable assortment for every season and occasion for all the members in the family.

Big Lot presently carries a Zacks Rank #3 (Hold). A VGM Score of A coupled with a long-term expected earnings growth rate of 11.2% also highlights the company’s inherent potential.

Key Picks in Retail

Target TGT has a long-term earnings-growth rate of 13.3% and a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG, presently a Zacks Rank #1 stock, has a long-term earnings-growth rate of 11.3%.

Costco COST has an expected long-term earnings growth rate of 9.1% and a Zacks Rank #2 (Buy) at present.

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