Big Lots, Inc. · OTC:BIGGQ
Big Lots — Investor Presentation (January 2022)
41 slides from Big Lots's investor presentation, Jan 10, 2022
Slide 1: Investor Presentation January 2022
INVESTOR PRESENTATION January 2022
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words “anticipate,” “est
Slide 3: Big Lots Is a Compelling Investment Opportunity
BIG LOTS IS A COMPELLING INVESTMENT OPPORTUNITY • Tremendous runway for growth through footprint expansion and market-share gain • Clear positioning as a home discount retailer • Unique assortment and rapidly developing omnichannel capabilities • Growing base of loyal customers • Value never goes ou
Slide 4: About Big Lots
ABOUT BIG LOTS OUR COMPETITIVE ADVANTAGE OPERATION NORTH STAR OUR FINANCIAL GOALS 4
Slide 5: We Have a Clear Purpose & Vision Grounded in Our Values
WE HAVE A CLEAR PURPOSE & VISION GROUNDED IN OUR VALUES OUR PURPOSE OUR VISION Be the BIG difference for a better life by… OUR VALUES § …delivering unmatched value and surprising products § …building a “best places to grow” culture § …engaging with partners to innovate & execute § …rewarding shareho
Slide 6: We Have National Scale and a Strong Omnichannel Presence
RANKED 449TH in the Fortune 500 in 2020 ~22,800 SELLING SQ FT per store 22 MILLION Rewards members 10% CAGR over last 5 years >5% eComm Penetration eComm Sales 4x vs 2019 AT A GLANCE $6.2 BILLION Trailing 12- month sales 1,431 Stores across 47 states WE HAVE NATIONAL SCALE AND A STRONG OMNICHANNEL P
Slide 7: We Offer a Broad and Well-Balanced Merchandise Assortment
WE OFFER A BROAD AND WELL-BALANCED MERCHANDISE ASSORTMENT Furniture, 30% Food & Consumables, 26% Hard & Soft Home, 26% The Lot, Apparel, Electronics, etc., 9% Note: Percentages are shares of total company year-to-date sales through Q3 2021.7 Seasonal, 9%
Slide 8: We Have a Growing Base of Loyal Customers
14 15 17 19 21 2210% CAGR Rewards Customers (M) WE HAVE A GROWING BASE OF LOYAL CUSTOMERS 2016 202020192017 2018 20211 1. As of end of Q3 2021. OVER 75% FEMALE SPANS ALL INCOME BRACKETS MAJORITY AGE 40+, SHIFTING YOUNGER LIVES FOR HER HOME & FAMILY ENJOYS HUNTING FOR TREASURES & BARGAINS LOVES TO HO
Slide 9: We Do Good as We Do Well
WE DO GOOD AS WE DO WELL WE PARTNER WITH NATIONAL NONPROFITS… …AND HAVE A STRONG FOCUS ON ESG CLICK HERE TO FIND OUR BIG CARES REPORT ONLINE! 9
Slide 10: Our Competitive Advantage
ABOUT BIG LOTS OUR COMPETITIVE ADVANTAGE OPERATION NORTH STAR OUR FINANCIAL GOALS 10
Slide 11: We Are a Value-Obsessed Home Discount Retailer
WE ARE A VALUE-OBSESSED HOME DISCOUNT RETAILER SPECIALTY DISCOUNT (Single-category, off-price) GENERAL DISCOUNT (Multi-category, off-price) GENERAL MERCHANTS (Multi-category, EDLP) SPECIALTY MERCHANTS (Single-category, EDLP) LEAST CROWDED SPACE, WITH ROOM TO GROW BROAD AND DIVERSIFIED NOT EASILY REP
Slide 12: Why She Shops Us
WHY SHE SHOPS US… THE BARGAIN HUNT Big Buys and closeouts THE TREASURE HUNT Unique seasonal and trend items SHIFTING OUR ASSORTMENT TO TWO THIRDS IN & OUT, FROM LESS THAN HALF TODAY THE CONVENIENCE TRIP Reliable assortment of simple to shop essentials 12
Slide 13: Why She Loves Us
EXCEPTIONAL VALUE Limited time deals, off-price closeouts, Broyhill® & Real Living brands SURPRISING PRODUCTS Unique, quirky items, seasonal trends, nostalgic finds EASY SHOPPING True-omni channel offering, easy to navigate store/website, take home today, multiple payment types DELIGHTFUL EXPERIENCE
Slide 14: Building a Compelling Value Proposition
BUILDING A COMPELLING VALUE PROPOSITION WHO WE ARE… HOME DISCOUNT RETAILER WHY SHE SHOPS US… Exceptional value Surprising products Delightful experience Easy shopping WHY SHE LOVES US… Only multi-category in-and-out merchant with true national scale Unique, emotionally connected brand experience Unm
Slide 15: Operation North Star
ABOUT BIG LOTS OUR COMPETITIVE ADVANTAGE OPERATION NORTH STAR OUR FINANCIAL GOALS 15
Slide 16: Operation North Star Multi-Year Transformational Growth Plan
OPERATION NORTH STAR IS OUR MULTI-YEAR TRANSFORMATIONAL GROWTH AND VALUE- CREATION PLAN LAUNCHED IN 2019 FUND ENABLE GROW Store count growth Sales productivity eCommerce acceleration Brand activation and customer growth Pricing and COGS program Promos and markdowns Shrink and loss reduction Structur
Slide 17: Our Value-Creation Opportunity
OUR VALUE-CREATION OPPORTUNITY IS UNDERPINNED BY... • A Long Runway for Growth • Significant Margin Opportunity • Consistent Cash Flow Generation & Capital Return And We Are Already Realizing Many Quick Wins… 17
Slide 18: Our Runway for Growth
OUR RUNWAY FOR GROWTH… 500+ Potential new store locations $1.5-$2B Opportunity through new store growth $1B+ Opportunity to improve productivity 15%+ Increase in sales productivity potential 10%-15% eCommerce penetration $0.5-$1B+ Opportunity in eCommerce sales growth Note: eCommerce sales are not f
Slide 19: Growing Our Store Footprint
GROWING OUR STORE FOOTPRINT § Returning to growth after decade of flat store count § 500+ opportunities across established market fill-ins, rural/small town markets, and under-penetrated geographies § Adding 50+ net new stores in 2022 and accelerating after 2022 to 80+ per year § New stores deliveri
Slide 20: Sales Productivity Drivers
SALES PRODUCTIVITY DRIVERS § Optimizing assortments, through category discipline and space planning § Rolling out our Next Gen Furniture Sales model to 500+ stores § Growing Furniture with Broyhill®, modern assortments, and expanded distribution § Winning Seasonal year-round § Expanding our rapidly-
Slide 21: Driving eComm Acceleration
DRIVING eCOMM ACCELERATION § Removing friction points with enhanced search, easy checkout and financing options § Increasing website personalization, including product best sellers and new arrivals § Accelerating supplier direct fulfillment and extending our aisle and assortment § Growing site traff
Slide 22: Activating Our Brand
ACTIVATING OUR BRAND § Creating a community of bargain hunters and treasure seekers § Driving incremental visits from new and existing customers § Increasing brand awareness, consideration, and purchasers § Driving personalized marketing based on our customer data platform Continuing the breakthroug
Slide 23: Significant Margin Opportunity
SIGNIFICANT MARGIN OPPORTUNITY Managed Rate Optimization Accretive Strategic Growth 100-200 bps Gross Margin expansion through: • Pricing and promotion optimization • Space planning and per-store allocation • Mix benefits • Shrink and loss reduction • COGS productivity • Supply chain normalization L
Slide 24: Consistent Cash Flow Generation and Capital Returns
CONSISTENT CASH FLOW GENERATION AND CAPITAL RETURNS • History of strong free cash flow • Over $1 billion returned to shareholders since 2016 • Capex spend achieving ROIC well in excess of weighted-average cost of capital • Strong capital allocation discipline • Excellent liquidity access and debt-fr
Slide 25: Building a Supply Chain to Support Our Growth
BUILDING A SUPPLY CHAIN TO SUPPORT OUR GROWTH • Expanding Forward DC network to support bulk product and increase speed to store • Modernizing supply chain technology through investing in Transportation Management, End-to-End Supply Chain Visibility, and Order Management System • Enhancing eCommerce
Slide 26: Improving Our Customer Experience
IMPROVING OUR CUSTOMER EXPERIENCE § Over 37,000 associates that Bring their BIG! everyday, with top quartile NPS § Customer-centric focus that provides a friendly, delightful shopping experience § Updating 800 stores through Project Refresh to deliver a consistent and upgraded brand experience § Upg
Slide 27: Seasoned and Ambitious Management Team
Nick Padovano Store Operations Prior Experience: Lowe’s, Hudson Bay Company Joined Big Lots: 2014 Andrej Mueller Strategy Prior Experience: Boston Consulting Group Joined Big Lots: 2019 Shannon Letts Real Estate Prior Experience: Walton Enterprises, Walmart Joined Big Lots: 2021 Mike Schlonsky Human
Slide 28: Seasoned and Ambitious Management Team
Jonathan Ramsden Finance Prior Experience: Abercrombie & Fitch, Omnicom Group Inc. Joined Big Lots: 2019 WE HAVE A SEASONED AND AMBITIOUS MANAGEMENT TEAM BRINGING THIS ALL TOGETHER Gurmeet Singh Technology Prior Experience: Al-Futtaim Group, Boston Consulting Group, 7-Eleven Joined Big Lots: 2021 Ro
Slide 29: Our Financial Goals
ABOUT BIG LOTS OUR COMPETITIVE ADVANTAGE OPERATION NORTH STAR OUR FINANCIAL GOALS 29
Slide 30: Ambitious Long-Term Financial Targets
SALES $8-$10B WE HAVE AMBITIOUS LONG-TERM FINANCIAL TARGETS OPERATING MARGIN 6%-8% ROIC1 20%-25% Defined growth drivers Gross margin expansion and disciplined expense management Accretive investments and ongoing return of capital 1 ROIC defined as adjusted (non-GAAP) trailing 12-month net operating
Slide 31: Fundamentals for Achieving Our Long-Term Goals
SALES GROWTH FUNDAMENTALS FOR ACHIEVING OUR LONG-TERM GOALS CAPITAL ALLOCATION DISCIPLINE OPERATING MARGIN IMPROVEMENT • Consistent low-single digit comparable sales growth • Opening 80+ net new stores per year • Growing eCommerce to over $1 billion channel • Driving gross margin expansion vs. 2021
Slide 32: Appendices
APPENDICES 32
Slide 33: Historic Financials
HISTORIC FINANCIALS ($ in millions except EPS) $3.64 $4.45 $4.04 $3.67 $7.35 2016 2017 2018 2019 2020 ADJUSTED EARNINGS PER SHARE(1) (1) See slides 37-41 for the reconciliation of GAAP to non-GAAP Adjusted Gross Margin, Adjusted Operating Margin and Adjusted Earnings per Share. 40.4% 40.7% 40.5% 39.
Slide 34: Historic Capital Allocation
HISTORIC CAPITAL ALLOCATION ($ in millions) (1) ROIC defined as adjusted (non-GAAP) trailing 12-month net operating profit after tax divided by average invested capital (long-term debt and shareholders’ equity) over the same time period. See slides 37-41 for the reconciliation of GAAP to Non-GAAP ne
Slide 35: Historic Store Information
HISTORIC STORE INFORMATION 1,432 1,416 1,401 1,404 1,408 2016 2017 2018 2019 2020 STORE COUNT 31.5 31.4 31.2 31.7 32.0 2016 2017 2018 2019 2020 SQUARE FOOTAGE (IN MILLIONS) $164 $168 $168 $168 $194 2016 2017 2018 2019 2020 SALES PER SELLING SQUARE FOOT 35
Slide 36: Five-Year Adjusted Financial Summary
In thousands, except earnings per share 2016 2017(3) 2018 2019 2020 Net Sales $ 5,193,995 $ 5,264,362 $ 5,238,105 $ 5,323,180 $ 6,199,186 Adjusted Gross Margin(1) $ 2,099,419 $ 2,142,442 $ 2,121,895 $ 2,120,732 $ 2,497,386 Adjusted Gross Margin Rate(1) 40.4% 40.7% 40.5% 39.8% 40.3% Adjusted Operatin
Slide 37: Fiscal 2016 GAAP to Non-GAAP Reconciliation
FISCAL 2016 GAAP TO NON-GAAP RECONCILIATION As Reported Adjustment to exclude pension costs Gain on sale of real estate As Adjusted (non-GAAP) Selling and administrative expenses $ 1,730,956 $ (27,766) $ 3,823 $ 1,707,013 Selling and administrative expense rate 33.3% (0.5%) 0.1% 32.8% Operating prof
Slide 38: Fiscal 2017 GAAP to Non-GAAP Reconciliation
FISCAL 2017 GAAP TO NON-GAAP RECONCILIATION As Reported Adjustment to exclude gain on insurance recoveries Impact on deferred taxes resulting from U.S. tax reform As Adjusted (non-GAAP) Selling and administrative expenses $ 1,723,996 $ 3,000 $ - $ 1,726,996 Selling and administrative expense rate 32
Slide 39: Fiscal 2018 GAAP to Non-GAAP Reconciliation
FISCAL 2018 GAAP TO NON-GAAP RECONCILIATION As Reported Adjustment to exclude CEO retirement costs Adjustment to exclude shareholder litigation matter As Adjusted (non-GAAP) Selling and administrative expenses $ 1,778,416 $ (7,018) $ (3,500) $ 1,767,898 Selling and administrative expense rate 34.0%
Slide 40: Fiscal 2019 GAAP to Non-GAAP Reconciliation
FISCAL 2019 GAAP TO NON-GAAP RECONCILIATION As Reported Impact to exclude department exit inventory impairment Impact to exclude transformational restructuring costs Adjustment to exclude legal settlement loss contingencies Adjustment to exclude gain on sale of distribution center As Adjusted (non-
Slide 41: Fiscal 2020 GAAP to Non-GAAP Reconciliation
FISCAL 2020 GAAP TO NON-GAAP RECONCILIATION As Reported Adjustment to exclude gain on sale of distribution centers and related expenses As Adjusted (non-GAAP) Selling and administrative expenses $ 1,965,555 $ (3,956) $ 1,961,599 Selling and administrative expense rate 31.7% (0.1%) 31.6% Gain on sale