Big Lots Inc. (BIG), the largest broad-line closeout retailer recently announced organizational modifications and named John Martin, as the Executive Vice President, Administration and Doug Wurl as the Executive Vice President, Merchandising.
The move is aimed toward enhancing its store operations capacity and escalating its manpower. The improvement in store productivity and the softening of the real estate market prompted management to increase its store openings.
John’s appointment came in as a part of the company’s strategy of uniting the operations of Human Resources and Stores Operations, which in turn, will facilitate the company in developing and preserving its professionals. John is veteran in managing these two significant areas of the business.
Earlier, Doug Wurl was the Vice President, General Merchandise Manager of Sears Holding Corporation (SHLD). Doug will be systematizing the company’s merchandise and will work on increasing the extent of Big Lots’ global procurement endeavor.
Based in Columbus, Ohio, Big Lots procures branded merchandise at lower costs from vendors, who have excess inventory and resort to a fire sale of their goods, or have higher sales returns or discontinued products. Further, the company’s closeout format provides it with an edge over traditional discount retailers as it offers merchandise assortments to customers at cheaper rates.
Big Lots has a strong management team, which has been actively managing its capital. The company now expects to generate approximately $205 million of cash flows during fiscal 2011. Moreover, the company has been returning much of its free cash to shareholders via share repurchase and portrays a healthy balance sheet with almost no debt.
However, Big Lots operates in extremely aggressive money off retail business and faces stiff competition from other general merchandise, discount, food, arts and crafts, and dollar store retailers. This may result in loss of market share and fall in sales and operating margins. Further, the competitors having larger number of stores, greater market presence, and financial resources will continue to weigh on the company’s results.
Moreover, the company’s consumers remain susceptible to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their disposable income, and in turn, the company’s growth and profitability.
Currently, we prefer to maintain a long-term ‘Neutral’ recommendation on the stock. Big Lots also holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
BIG LOTS INC (BIG): Free Stock Analysis Report
SEARS HLDG CP (SHLD): Free Stock Analysis Report
Zacks Investment Research
