--Big Lots posts better-than-expected loss
--CEO plans to depart
--Company feels well positioned for Christmas
(Updates with more information about Chief Executive. Updates
stock price)
By Karen Talley and Joann S. Lublin
Big Lots Inc. (BIG) Chief Executive Steven Fishman is retiring
from the closeout retailer as it continues to grapple with its
relatively unique business model that has seen good times and
bad.
Mr. Fishman, 61 years old, who said he's leaving the company to
spend time with his family, has been chief executive for nearly
eight years and also holds the titles of chairman and president.
This is the latest executive shift at Big Lots; in August, the
company named a new chief financial officer and a new chief
operating officer.
Big Lots board members "think very highly" of Lisa Bachmann, who
was promoted to chief operating officer in August, one person
familiar with the situation said Tuesday. However, she shouldn't be
considered the lead contender to succeed Mr. Fishman as directors
want to consider all options, including external candidates,
according to this person.
With the departure of Mr. Fishman, Big Lots Inc. is losing a
linchpin in its efforts to become a consistently profitable
company. Before joining Big Lots, Mr. Fishman served as chief
executive, president and chief restructuring officer of Rhodes
Furniture after being a board member for several years. Prior to
Rhodes, Mr. Fishman was the chairman and chief executive of Frank's
Nursery & Crafts, a lawn and garden-specialty retailer that he
also had a role in restructuring.
Big Lots tapped recruiters Korn/Ferry International several
weeks ago to handle its CEO search, another informed individual
said. The big search firm helped it recruit Mr. Fishman.
Of his departure from Big Lots, Mr. Fishman "has been
instrumental in stabilizing and turning around the company," said
Charles Grom, retail analyst at Deutsche Bank.
Still, Mr. Grom said, "it was clear that Mr. Fishman was
struggling -- and still is -- to drive positive traffic and the
model itself is currently being tested as it clearly sells too many
closeout consumable items. With this in mind, a change in direction
could be a positive if the right person is put into the seat."
Mr. Fishman in the spring drew flak from shareholders for a
highly beneficial trade he made as this year's first quarter drew
to a close. Mr. Fishman exercised stock options and sold a little
over $10 million of Big Lots stock on March 20. On April 23, Big
Lots surprised investors by disclosing that first-quarter sales had
slowed.
The trades were highlighted in a recent Wall Street Journal
report on timely share sales by executives.
When asked about the report during the company's earnings call
Tuesday, Chief Administrative Officer Chuck Haubiel said: "We
certainly understand the rules, follow the rules and there's
probably not a whole lot more to add."
Mr. Fishman, on the conference call Tuesday to discuss
third-quarter results, expressed some guardedness about the
company's near future. He cited "some anxiety on the part of
consumers" and said cooler weather arriving before the holidays
would supply a welcome boost.
Looking at the fourth quarter and the balance of the holiday
season, "We're managing our business very tightly with caution but
also with a bit of encouragement," Mr. Fishman said. "In particular
during the peak of traffic in the last week of November, we were
encouraged by performance of some of our most important holiday
categories."
Big Lots "will be aggressive from now until Dec. 24, and through
the fourth quarter," he said. "And, I'm confident we will make good
decisions on inventory levels and inventory management."
Big Lots raised its full-year adjusted earnings estimate to
between $2.86 and $3.05 a share from its previously lowered August
forecast of $2.80 to $2.95 a share. The company also forecast
current-quarter adjusted earnings of $1.91 to $2.10 a share, while
analysts surveyed by Thomson Reuters expect $2.02 a share.
Big Lots shares were recently up 11% to $31.15.
While Mr. Fishman spoke with some confidence, analysts weren't
very upbeat. "While the headline print should make the bulls feel a
bit better, the reality is same-store sales remain weak; inventory
levels remain bloated; Big Lots continues to lever up--debt now at
highest level in 10 years--to support cash flow; and the company's
fourth-quarter earnings-per-share guidance looks aggressive," said
Charles Grom, retail analyst at Deutsche Bank.
"We believe fiscal 2013 is setting up as a 'transition year'
with downside potential," said J.P. Morgan analyst Matthew
Boss.
Big Lots, which helps manufacturers clear their warehouses of
overstocked and discounted goods, has seen its profits pressured by
softening demand for higher-margin segments like furniture and
seasonal goods and competition from online and other low-price
retailers. Like Wal-Mart Stores Inc. (WMT), Big Lots targets
cost-conscious customers who are being pinched by higher fuel and
food prices.
In an attempt to catch up, the company is testing coolers and
freezers to add more consumable goods, looking into a new rewards
loyalty program in several markets and store remodels as part of a
three-year strategic plan that runs through 2015.
For the quarter ended Oct. 27, Big Lots reported a loss of $5.99
million, or 10 cents a share, compared with a profit of $4.19
million, or six cents a share, a year earlier.
Its August projection was for a per-share loss between 20 cents
and 30 cents.
Sales declined 0.4% to $1.13 billion, just shy of the $1.14
billion expected by analysts polled by Thomson Reuters.
Gross margin shrank to 38.1% from 39%.
Same-store sales, or sales from U.S. stores open for at least 15
months, fell 4.6%.
The company's Canadian operations narrowed its loss to $4.31
million on sales of $39 million, an 81% increase from a year
ago.
--Melodie Warner contributed to this article
Write to Karen Talley at karen.talley@dowjones.com
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