Big Lots, Inc. · OTC:BIGGQ
Big Lots — Q4 2006 Earnings Presentation
36 slides from Big Lots's earnings presentation, Mar 15, 2007
Slide 1: Q4 2006 Conference Call
Q4 2006 Conference Call March 9, 2007
Slide 2: Forward-Looking Statements, Safe Harbor Provision
Forward-Looking Statements, Safe Harbor Provision
Slide 3: Agenda
Agenda Ø Results for Q4 and FY 2006 Ø Year Strategic Outlook Ø Financial Outlook
Slide 4: Q4 and fiscal 2006 results
Actual Actual chg (millions) 2006" 2005 s % Sales $1505 11% om SG&A Oper. Profit Net int (income) Expense Taxes Net income 1084 21% 34.3 8% 742 118% ) Results retect continuing operations and include 14 weeks compared to 13 weeks in isc BIGLOTS! sane WER
Slide 5: Balance sheet reflects improvements in inventory management
Balance sheet reflects improvements in inventory management
Slide 6: Cash flow of $351 million for fiscal 2006
Cash flow of $351 million for fiscal 2006 is reflective of improved operations and diligent capital allocation
Slide 7: Capital expenditures totaled $36 million for fiscal 2006
Capital expenditures totaled $36 million for fiscal 2006
Slide 8: Completed $150 million share repurchase program during Q4
Completed $150 million share repurchase program during Q4 Ø Q4 activity – Repurchased 0.7 million shares for $16 million – Weighted average cost of $22.78 per share Ø For the full year, $150 million investment to repurchase 9.4 million shares – 8% of outstanding shares at the beginning of 2006 – Wei
Slide 9: "9 Weeks of Christmas" drove Q4 results
“9 Weeks of Christmas” drove Q4 results
Slide 10: Furniture, Hardlines, and Seasonal were category leaders
Furniture, Hardlines, and Seasonal were category leaders
Slide 11: Merchants are improving inventory turnover
Merchants are improving inventory turnover and increasing the amount of floor ready merchandise
Slide 12: Marketing programs are helping drive sales
Building on merchandise successes, marketing programs are helping drive sales
Slide 13: Progress of our website
In addition, we are excited about the progress of our website
Slide 14: Bottom line: we made Big Lots a stronger company in 2006
* Results reflect continuing operations and include 53 weeks compared to 52 weeks in fiscal 2005 Bottom line … we made Big Lots a stronger company in 2006
Slide 15: Year Strategic Outlook
BIGLOTS! sano WT
Slide 16: Distinct Phases of WIN Strategy
Distinct Phases of WIN Discovery … second half of 2005 Testing … 2006 Execution … 2007 and beyond WIN Strategy
Slide 17: Execution Phase 2007 through 2009
Execution Phase 2007 through 2009 Ø Annual, compounded EPS growth of 20% Ø Operating profit plan based on core store growth … not store growth story Ø Incorporated results of Discovery, Testing and Learning phases of WIN Strategy Ø Supported by customer research
Slide 18: Holiday season survey of over 2,000 customers
During the Holiday season we surveyed over 2,000 customers Key learnings: Ø 80% of customers come to our store without a list Ø Price dominates top of mind awareness Ø Approximately half of customers spend between 30 and 60 minutes in our store Ø Customers said deals are getting better in Seasonal a
Slide 19: Key Customer Demographics
Key Customer Demographics Ø 75% Female, 25% Male Ø 75% Caucasian, 10% Hispanic, 10% African American Ø Customer household income is more towards middle income than national average
Slide 20: Household income demographics of core customer
Household income demographics suggest our core customer is closer to middle income than national averages
Slide 21: Merchandising strategies successful in each income demographic
Recent results suggest our merchandising strategies have been successful in each income demographic
Slide 22: Customer research supports long range merchandising strategies
Customer research supports long range strategies in merchandising Key Elements of Merchandising strategy: Ø “Raise the Ring” Ø Closeouts and top brands Ø No fear of price points and customers are willing to pay for quality goods Ø Customers like our current categories and no major additions/exits an
Slide 23: Key growth opportunities will be pursued
Key growth opportunities will be pursued Furniture Ø Hardlines … particularly Electronics Ø Home … particularly Domestics Ø Seasonal Ø
Slide 24: Marketing strategies will supplement merchandising
Marketing strategies will supplement efforts in merchandising Ø Ad circulars – Likely to continue at rate of 26 per year – Opportunity to save dollars to fund television Ø Television program will continue with commercials more prominently displayed on key programs Ø Pushing forward development of “B
Slide 25: Merchants focus on gross margin dollars and inventory turnover
Merchants will continue to focus on gross margin dollars and inventory turnover Ø Stabilized gross margin rate at approximately 40% expected to continue for next years – Opportunities in Global Sourcing – Partially offset by sales growth plans in some lower margin strategies Ø Inventory turnover exp
Slide 26: SG&A leverage expected over the 3 year period
SG&A leverage of 50 to 70 basis points per year is expected over the 3 year period: Ø Heavily dependent on continuing change in merchandise “buy” processes Ø Inventory management and increasing turns Ø Investments or process changes in stores and DCs Ø Diligent capital allocation
Slide 27: Process changes and new initiatives will drive expense leverage
Process changes and new initiatives will drive expense leverage in larger expense categories Ø Stores Ø Distribution and Transportation Ø Insurance Ø Advertising Ø Depreciation
Slide 28: Capital spending estimated at $170 to $190 million
Capital spending estimated in the range of $170 to $190 million over the next years Ø Maintenance capital … approximately $90 million Ø New stores … $15 - $20 million Ø POS register system investment … $40 - $45 million Ø Other potential strategic investments … $25 - $35 million – Store Relays – Mer
Slide 29: Financial Outlook
Financial Outlook
Slide 30: Board authorized $600 million share repurchase program
Board of Directors authorized $600 million share repurchase program Ø Multi-year program with open-ended term Ø Allows for repurchase of approximately 22% of shares outstanding at share price on date of announcement Ø Funded from: – $280 million in Cash (BOY ’07) – $500 - $600 million of anticipated
Slide 31: 2007 Annual Guidance
* Results reflect continuing operations and include 53 weeks compared to 52 weeks in fiscal 2007 2007 Annual Guidance
Slide 32: 2007 Annual Guidance (continued)
2007 Annual Guidance (continued)
Slide 33: Q1 2007 Guidance
* Results reflect continuing operations only Q1 2007 Guidance
Slide 34: 3 Year Outlook estimates 20% EPS growth annually through 2009
Year Outlook estimates 20% EPS growth annually through 2009 Key Assumptions: Ø 3% comp per year Ø Flat gross margin rate Ø SG&A leverage Ø Operating profit potential of 5.5% by 2009 Ø Translates to EPS of $1.75 by 2009
Slide 35: 3 Year Outlook: other key metric estimates by 2009
Year Outlook Other Key Metric estimates by 2009: Ø Inventory turnover improvement to approximately 3.7 Ø Cumulative cash flow estimated at $550 - $600 million Ø Cumulative capital expenditures of $170 - $190 million Ø ROA in the range of 10% - 11%
Slide 36: Q4 2006 Conference Call
Q4 2006 Conference Call March 9, 2007