BIG
#Thank you for the questions.
Yes, we did assume that we would roll out the private label credit card here in the second quarter so I wouldn\
Good question.
<UNK>, I think first off when we think about the month of May, being totally transparent, we had planned the month of May below our guidance for the sole fact that Memorial Day comes a week later and all of our marketing efforts focused on Memorial Day are shifted or are different year-over-year because of that timing.
So the month of May and where it sits is not necessarily indicative of how we think the quarter is going to play out.
When we think about the second quarter though in Furniture, we would continue to expect that it is a leading category up in the high single digit range, could reach a little bit higher but definitely high single digits would be our expectations coming in.
Again, taking into account that we have multiple programs in place to drive business, we've got a completed Furniture expansion, we are just introducing in the last three or four days to Jennifer that we have completed a Bigger, Better, Furniture department expansion with all of the marketing collateral behind it including the launch of the credit card, etc.
So there are a lot of different initiatives in place to help drive second quarter and the balance of the year and multiple years ahead.
From a Seasonal perspective, I appreciate you giving us the opportunity to use prior-year comps as a reason but we know we need to comp on the comp in Seasonal.
It is an Ownable category, we are going to have to grow on top of growth.
So when we think about second quarter, it isn't necessarily about the more difficult comparison from last year, it truly is about better sellthrough in first quarter primarily in Lawn and Garden.
We knew coming into the second quarter was going to present a little bit more of a challenge.
And then if we are all being transparent here, we know when our business, we know when the weather is good our business in Seasonal will be very good.
We know that, we have seen it, just like we experienced our business in Furniture being very good when tax refunds are out there and on time.
So we are confident in the assortments.
That is why they are Ownable, Winnable categories because we know we can differentiate there.
We know we've got teams focused in our stores to make it happen, so we feel very good about both of those categories going into the second quarter.
So from a margin perspective in the second quarter, again not to repeat myself but I will go ahead with the higher sellthrough in Seasonal in the first quarter clearly we think we\
So from a regional standpoint, that is one of the reasons why we called out the Northern and Midwestern regions of the country.
Certainly did a little bit better year-over-year in Seasonal than the balance of Company and that was very clear to us in the numbers.
Another reason why those areas of the country outperformed a little bit in the first quarter also relates to our Furniture ---+ so you know from following us for a long, long time that we have a more concentrated, in a number of stores, a larger Furniture presence in some of our Northern Midwestern markets than we might in some of the Southern markets and certainly much, much more concentrated than we have in California as an example.
So weather year-over-year and clearly the Furniture strength can help some of our more mature markets in the North and the Midwestern parts of the country.
Specifically, on the second part to your question thinking about I think your phrase was energy markets for the Texas market.
My recollection is we comped positive in those markets or certainly in that region for the quarter as we did in all regions.
And not to the extent of the Northern or more weather-impacted markets, but certainly we comped in those areas of the country that are seeing some challenges from an energy perspective.
We've got a very good team in the Southeast and Southwestern markets, again same opportunities from an inventory, value, strategy standpoint so we have every expectation that those markets will continue to perform.
The first piece of that I would tell you we look at, you know the Furniture business is highly fragmented I guess is the word I would use.
Outside of the national player, Ashley Furniture, which we do business with is really the only odd guy out there on a national basis besides us.
So we look at all the different regional players by market but we really ---+ and we have talked about this many times ---+ if you look at our assortment in upholstered furniture and mattresses and all of those mattresses are what we call SMUs or special makeups that are built for us exclusively by Serta.
And we have an incredible value proposition there, opening price points are our sweet spot both in Mattresses, Casegoods which we primarily, for the most part outside of some product, we buy from Ashley is all product that is built for us primarily in Vietnam.
So very competitive opening price point strategy versus some of your traditional furniture regional players as well as Ashley, we really play in the opening price point with them as well versus their higher-end assortment.
So again, that is really ---+ it is a big differentiator and the reason we talk about Ownable is when you think about the discount space and the two big guys out there, they don't transact in the brick and mortar in those businesses.
And so we really have a nice ability to continue to grow it and take share away from again regional, like here in Columbus, you have Value City as an example, Meijer out of Michigan does some roadshow business.
You look at Costco, very, very high-end furniture assortment.
So we are really a value proposition, great quality, and great fashion and again as I said before, this team is incredibly highly energized, the BPARM teams, and they are not afraid to test and learn and under Martha's leadership expanding the offerings where appropriate and taking the fashion level up to a higher level and again also testing higher price points in both Mattresses and in Furniture as well.
We just have great partnerships with our suppliers from United in Upholstery.
I am actually going to be down in their factory next week.
So again, it is a business that our vendors are tremendously supportive of and that is really, really the strategy there.
The reason why we talk about Ownable is that is exactly why because there is not a lot of competition in the discount space and certainly the dollar stores aren't in the Furniture business.
Hopefully that answers your question, Matt.
We feel really good about it.
We have been fairly consistent through this SPP process, so 2014, 2015 and 2016, 2016 the year we are in; so third year that a flat to slightly positive comp would be necessary in order to leverage expenses.
So I see no reason why based on first-quarter results or outlook for the balance of 2016, why we should come off of that.
It is happening in our business today and clearly with the upside on comp in the first quarter up to a 3%, you can see the power of the leverage.
Looking forward, we will have more to say.
As <UNK> mentioned in his prepared comments, we are going to have our second investor conference under <UNK>'s leadership, will happen later this fall.
And we will be able to speak more intelligently about 2017, 2018 and 2019 and what our key initiatives are going to be in the business, what investments we might want to make and what our expectations are from a category standpoint, marketing, the whole strategy like we articulated a couple of years back.
So premature to talk about 2017, 2018 and 2019, but that is where we will spend some of our time when we are together later this year.
I will take that question, <UNK>.
Thank you.
It is a good question.
We have spent a little time yesterday actually with our Board of Directors talking about that.
And we certainly are well aware of all of the store closings out there that are going to be liquidations that are taking place now, and probably a lot of that real estate won't open up until next year as the dust settles and the guys who are in some of that space will take those higher rents.
What I would tell you is we are still looking at the store base saying we want to improve the current existing fleet that we have of the 1,448 stores that we have today.
We know, as TJ used the word full transparency, that we have a lot of work to do to update those stores whether it is just signs on the outside of the store or the interiors, and we feel that is a better place for us.
Because as I said in our prepared remarks, honestly our country, as we all know is way over-stored, and I recognize that there are some folks out there that are continuing to grow their store base but a completely different strategy than ours.
So we will look at that real estate when it comes available and when the rents are reasonable, and we would probably look at it more as a relo opportunity where we have some stores that we would like to improve the size so that we can ---+ for example Southern California, some of our stores don't have the room for Furniture, things like that.
But I am not real bullish on growing the store base at this moment in time.
But again, we are always opportunistic and TJ can add a little color because Real Estate reports to him and his team is razor-focused on looking at the opportunities market by market is what we really do today.
We just did Phoenix a few weeks ago.
TJ, do want to add some color.
I really do appreciate the question and I appreciate the kind words that you mentioned in suggesting that we are ready for growth again.
I think that from our perspective, we had a significant amount of dialogue yesterday with the entire Board engaged on this entire topic.
And I guess from our perspective, in the right situation with the right rents, filling in markets because we are in most major markets, if those opportunities just fell in our lap I think we would be very, very interested in doing that.
Last time we went through a cycle like this you will probably remember in 2008, 2009 when we had two very large retailers go out at the same time, we did benefit from that although it took a little bit of time before those stores made it all the way through the process back through the bankruptcy court, landlords and came to us at rents that were something we could work with at our current level of productivity.
So I think we are on top of, we understand where the locations are, we understand which ones we would be most interested in.
Most of those as <UNK> mentioned, will help us not just relocate stores and increase productivity but also move the brand forward because in many of those markets it would allow us to increase our Furniture penetration, etc.
, etc.
So there's a lot of good reasons to look at what is going on right now in the real estate market in adding or relocating stores.
We are not ready to commit to that as an opportunity just yet.
We think it is still a little bit early, not because we don't want to, but because we just need to make sure they come back to us in the right locations at a rent that we can afford given our current productivity.
Now I say current productivity because that is the single biggest opportunity I think we all believe that we have.
As good as the business has been the last nine quarters at a real high level, we are in the mid-160s in terms of productivity and that is low compared to our competitive set and really speaks to where the single biggest opportunity is not just in comps but when that productivity goes up, obviously it will be much easier for us to think about new stores.
It is multiple items.
Fuel would be one, productivity in our buildings would be two, SKU optimization, carton flow, more consistent flow, a tight relationship between the entire supply chain would be a third.
So it is not any one item.
And candidly a fourth is the warehouse management systems or WMS systems that are now live in four of their five buildings.
We've got time under our belt now in learning a new system, learning potentially new processes all with the design of making us more productive in the building.
So there is multiple different reasons for the leverage.
Having said that, leverage in Distribution Transportation was our expectation all along coming into this year.
I think we are doing very well in that space as the business continues to evolve so multiple different reasons, Joe, for the leverage.
Not at all, Joe.
I would tell you someone asked the question earlier about the overtime thing, and we did the math on that and it is a very small impact.
We actually pay a really decent wage out there when you talk about our full-time store team leaders and then when you look at the hourly associates in the stores, we actually have a fairly generous package out there that is very competitive and we are not having difficulty at all.
And I would tell you that what is happening right now that really hasn't been talked about a lot and obviously a lot of folks I am well aware of and know who they are with this Sports Authority bankruptcy, you are going to have thousands and thousands of people out there both in distribution center as well as part-time and full-time hourly workers available.
So again, we are not seeing anything and a lot of that talk about price investment, when we walk that competitive set that you are referring to, we certainly don't see the upgrade in quality of people or the energy that seems to be talked about.
I believe that when you walk our stores and you talk to our associates they are highly engaged and highly energized.
Sure.
I will start with the second part first.
There is plenty of inventory in the stores today for Jennifer to shop in the Seasonal space.
Memorial Day is a very important part of our business so I just want to make sure everyone if you are still needing Seasonal product, come on out.
We have got plenty for you.
However, as the second quarter goes on, we do anticipate given the higher sell-through in first quarter, we don\
Yes, <UNK>, obviously we transacted for about two weeks in the quarter and it was a very slow opening process, not a lot of activity relative to the first quarter but the month of May obviously was in full operation.
And as I said earlier, the performance is really the big piece of it is coming out of the Seasonal areas with some Gazebos, some umbrella-type categories within Seasonal but also in some Summer categories.
I was just over there with the Board Wednesday walking the fulfillment center here in our back distribution center and you have seen a lot of product that she is buying like fashion dinnerware that our buyers buy in the Summer area for outdoor entertaining has been a big seller in there.
There has been a few limited assortment of Patio Furniture that has been on there that has performed very well.
And then secondly, the other area that has performed very well has been parts of Soft Home whether it has been in the bath area, towels and top of bed and sheets and so on.
So it is really fun to watch that happening because obviously Seasonal is an Ownable category for us and then Soft Home is Winnable so that has really been the focus.
What we have learned is we put some convenience businesses on there and we have learned that when we talk about our mission statement of surprises in every aisle every day, some of the surprises that happen and the team has done an outstanding job this year and as TJ said, hitting or beating their forecast in these convenience businesses.
One of them I will give you an example is we put sandals on the website.
It is a size business but it is also not top of mind so when we merchandise that if you have been in our stores this season, you will see those sandals in the aisle with a fixture that the customer has to navigate around.
So I look at that transaction as totally a surprise.
In other words, she didn't get up in the morning and say I'm going to go to Big Lots to buy sandals.
That is typically not what that customer does and that is why they ended up being edited.
And so that product is not performing but in the brick and mortar it is running up double digits so again, that is just a lesson learned for our team saying you know what, we just need to make sure that we put the Ownable, Winnable categories on there that she has told us clearly that she wants to buy online.
And as we move into the back half, obviously we will be putting on more Seasonal product and that product is built and on its way and assorted and that is the Christmas Trim part of the business.
And we feel very good about that as far as we move into the back half and that is really candidly fourth quarter is where we will see much higher level of transactions.
But being very cautious about how we roll this out and test and learn and the team is really on it and we have a great person who has merchandised that website and she is all over it with the merchants, and we feel very good about it.
I don't know, <UNK>, if you had time to look at it but it is a pretty robust website considering where we came from versus three years ago.
I want to stress here, <UNK>, and for everybody just how early some of these results are.
As <UNK> mentioned, really you had two weeks that had any kind of significant or measurable volume in the quarter and even in terms of communication and letting the public know that we are online, we have moved very slowly in order to make sure that we can handle the traffic and service the customer well.
I think we have been successful on each of those items.
I think one of the stats that was mentioned on the E-Comm DC tour was 99.9% or 99.8% accuracy in terms of getting the right product to the right customer on time and within the shipping windows and things like that.
So I think from an execution standpoint, we are off to a real good start in making sure it is a good experience for Jennifer.
But it is only this past weekend in our ad where we actually featured it in print for the first time saying you can shop these items on BigLots.com with the neat little buggy and the whole thing to tell them what items are available and which items are not.
So it is still very, very early in understanding how she is going to respond and what drives the most traffic to the site.
Additionally if you have been paying close attention, we have actually tested a couple of different shipping offers and there's many, many more tests to come I am sure.
So it is still very, very early in understanding and no different than our retail operation clearly as it has gotten warm out in the last handful of days in most regions of the country, we see our Seasonal business online get better than it had been the week before or the week before that.
So a lot of learnings still occurring but I think hopefully the key take away is we are moving forward in a very measured and diligent way so that we can really understand and test our way through this in 2016.
I guess that is all.
I don't believe you should expect it to be 50 to 100 basis points by the time we get to Q4.
That would suggest we would do almost our ---+ a large, large majority if not all of the year in Q4.
And from our perspective, <UNK>, we are putting it in the comp.
I would say it is still immaterial to the comp in most quarters.
We do expect it to build quarter to quarter through the year so obviously second quarter will be bigger than first since we will be online the entire quarter and third should be bigger than second and fourth obviously will be hopefully, much, much bigger than second or third.
So from our perspective, it is a pretty measured cadence, it should flow with website traffic and we expect our conversion to improve as the year goes on also.
We have had a lot of learnings so far, and I think maybe one of the most encouraging learnings is really how much in each transaction she is purchasing.
The average order value is probably a little higher than we anticipated so that is a good stat for us.
I think our challenge as we move through the year, we have website traffic every week, we had website traffic before we had an e-commerce business.
How do we convert more and more Jennifers once they get to the site and how do we reach the Jennifers that may not be in our Buzz Club or may not read the ad circulars, how do we let her know that we are now transacting online.
So still a lot of work to do, still a lot to learn as we move forward this year.
Sure.
Diluted share count for second quarter I would estimate between 44 million and 45 million for the quarter.
Thanks, <UNK>.
I believe when we gave initial guidance for the year, our estimate was an operating loss in the range of $10 million to $12 million for the year on sales of $20 million to $22 million.
I believe were our original estimates for the year so hopefully that helps from a modeling perspective.
Again, when you think about the operating loss, a couple of things to consider, we've got roughly a $40 million asset meaning we invested about $40 million of CapEx between late 2014 and the entirety of fiscal 2015.
That will depreciate primarily over a five-year life for the most part but some parts are a little bit longer so I think our guidance was roughly a $5 million to $6 million depreciation number included in that operating loss.
Our expectation would be we will have shipping costs and not net shipping revenue but there is a cost associated with the net costs associated with shipping product that you could add to the depreciation.
And then obviously with the partial year volume that from a loss perspective, we will not have a full year's worth of volume.
So still a tremendous amount to learn between now and the end of the year before we would be even remotely close to thinking about providing financial information out past this year.
So with roughly 3,000 SKUs on the website and knowing that as we move through this year, we may still have 3,000 SKUs but it will likely be a different 3,000 SKUs and how does Jennifer respond to that is still in front of us too.
And the last comment I will make and then I will stop talking about e-commerce is I will say the seasonal nature, the cyclical nature of this business is something we are going to learn too.
We understand our cadence in seasonality in brick and mortar, and we have made some assumptions that e-comm will follow that, that is an assumption.
We may find that it calendarizes differently for whatever reason.
So still a lot to learn from an e-comm perspective, but I feel good that we've got the disciplines around the cost, I feel good that we've got governance around shipping costs.
We meet every week to discuss shipping results and future promotions.
And I feel good about how Lisa and the BPARM teams are really trying to manage inventory and adjust inventory levels based on results, positive or the other way.
So I think we've got a lot of eyes on it, <UNK>, but we are still focused on the other 99.5% of the businesses where our primary focus is.
No reason at the moment, <UNK>.
I would tell you again we have already made adjustments in inventory.
We have already made adjustments in terms of how we are going to market with shipping costs and other things.
So we are already learning and applying those learnings to results.
But as we have talked about, we've really had three or four full week's worth of selling.
I think it is way too early to make adjustments for the year.
I think it will be more appropriate to talk about third quarter and fourth quarter expectations after we learn from second quarter.
Thank you, everyone.
Derek, will you please close the call with replay instructions.
