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Edited Transcript of BIG earnings conference call or presentation 29-May-20 12:00pm GMT

Q1 2020 Big Lots Inc Earnings Call

COLUMBUS Jun 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Big Lots Inc earnings conference call or presentation Friday, May 29, 2020 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew D. Regrut

Big Lots, Inc. - VP of IR

* Bruce K. Thorn

Big Lots, Inc. - CEO, President & Director

* Jonathan E. Ramsden

Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer

* Lisa M. Bachmann

Big Lots, Inc. - Executive VP and Chief Merchandising & Operating Officer

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Conference Call Participants

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* Anthony Chinonye Chukumba

Loop Capital Markets LLC, Research Division - MD

* Bradley Bingham Thomas

KeyBanc Capital Markets Inc., Research Division - Director and Equity Research Analyst

* Chandni Luthra

Goldman Sachs Group Inc., Research Division - Associate

* Elizabeth Lane Suzuki

BofA Merrill Lynch, Research Division - VP

* Joseph Isaac Feldman

Telsey Advisory Group LLC - Senior MD, Assistant Director of Research & Senior Research Analyst

* Matthew Robert Boss

JP Morgan Chase & Co, Research Division - MD and Senior Analyst

* Paul Trussell

Deutsche Bank AG, Research Division - Research Analyst

* Peter Jacob Keith

Piper Sandler & Co., Research Division - Director & Senior Research Analyst

* Renato Oscar Basanta

Barclays Bank PLC, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Big Lots first quarter conference call. (Operator Instructions) As a reminder, this conference is being recorded.

At this time, I'd like to introduce today's first speaker, Andy Regrut, Vice President, Investor Relations. Please go ahead, Andy.

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Andrew D. Regrut, Big Lots, Inc. - VP of IR [2]

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Good morning. Thank you for joining us for our first quarter conference call. With me here today in Columbus are Bruce Thorn, our President and CEO; Lisa Bachmann, Executive Vice President, Chief Merchandising and Operating Officer; and Jonathan Ramsden, Executive Vice President, Chief Financial and Administrative Officer.

Before we get started, I'd like to remind you that any forward-looking statements we make on today's call involve risks and uncertainties and are subject to our safe harbor provisions as stated in our press release and our SEC filings and that actual results can differ materially from those described in our forward-looking statements. Our first quarter results reported today do not include any non-GAAP adjustments. However, comparisons to prior year are to adjusted non-GAAP results. Reconciliations of GAAP to non-GAAP adjusted results are available in today's press release.

This morning, Bruce will start the call with a few opening comments. Lisa will discuss Q1 results from a merchandising perspective. Jonathan will review the financial highlights from the first quarter. And Bruce will complete our prepared remarks before taking your questions.

I'll now turn the call over to Bruce.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [3]

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Thank you, Andy, and good morning, everyone. I want to start by saying how proud I am of all that our team here at Big Lots has accomplished over the past quarter. We are certainly pleased with our financial results, which I'll come back to in a moment, but I am proudest of how we have responded to the unprecedented crisis of COVID-19 and the many ways in which we have grown as an organization.

Across all areas of our business, it has been inspiring to see how we have stepped up our game over the past 90 days. During that time, we have become more nimble, we have seen new leaders emerge and, most importantly, thanks to the incredible commitment of our store and DC associates, we have continued to serve our customers in as safe an environment as possible. We are particularly grateful to have had the opportunity to serve our country's heroes working in the medical, first responder and emergency services communities, along with active military and veterans.

When the crisis began to unfold in March, we aligned on 5 key priorities: first, that health and safety for associates and customers would take precedence; second, that we would batten down the hatches and focus on liquidity and business continuity to enable us to support our associates, our customers and our communities; third, that we would all lean on each other to successfully navigate this crisis as a team; fourth, that we would need to make quick and often imperfect decisions; and last, that we would think in stages of now, next and later and make sure we were communicating regularly to all of our stakeholders. The objective of our focus and actions was to navigate the crisis and come out of it stronger.

We realized quickly that we would need to incur some significant additional expenses to keep our stores, associates and customers safe. We didn't hesitate to do that and look to fund those investments with savings in other areas. We decided to cancel our Friends and Family event for safety reasons and closed on Easter day to give all of our associates a well-deserved break. We knew these decisions would carry a cost, but we also knew that they were the right things to do.

In the end, the result has been that our business has been much less disrupted than we feared. Our stores have remained open to serve our loyal customers and many new ones. And the rapid scaling of our e-comm business has been more critical to us than ever as we have seen e-comm penetration grow dramatically, particularly through BOPIS.

In addition, the team did a great job of managing our underlying expenses. The net result has been a quarter in which we posted our strongest comp in many, many years and grew our earnings by approximately 37%.

Before giving some more color on those numbers, I want to pause to thank all the associates for their commitment and dedication over the past months. It has truly been remarkable. I also want to thank our merchandising and non-merchandising vendor partners for being with us every step of the way through this crisis.

As you all know, our quarter got off to a slow start in February, driven in part by a pull-forward of sales from heavy promotional activity in January. In addition, unexpected choppiness in income tax refunds adversely impacted Furniture sales, especially over Presidents' Day weekend. The world obviously changed in March with the onset of COVID-19 as customers were confronted with a new way of living, which included stay-at-home and shelter-in-place restrictions. Supplies to stock up pantries with Food, Consumables and other staples were critical, and our sales meaningfully accelerated in the month.

The cancellation of Friends and Family and closing on Easter contributed to a slow start in April. However, the lost business was quickly overcome as stimulus checks were received and many customers focused on spending in categories such as Furniture and Seasonal to make their stay-at-home experience more pleasant. Many of these products carry higher margins so this mix shift helped to partially offset the heavy-volume and lower-margin food and Consumables categories. The net effect was a gross margin rate down approximately 80 basis points from last year's first quarter rate.

We did a very good job managing expenses during these uncertain times, with our expense ratio improving 180 basis points in the quarter despite incurring significant additional costs. The latter included a temporary increase in the wage rate of $2 per hour for in-store and DC associates beginning in mid-March, which we have recently extended through June, alongside an enhanced 30% associate discount, additional bonus pay and also significant additional costs to clean and disinfect our stores and distribution centers on an ongoing basis as well as personal protective equipment for associates, installing protective plexiglass shields at our cash register areas and other steps. Even with these costs included, we were able to achieve an EPS of $1.26 in the quarter, which compares to $0.92 last year.

Beyond these outstanding results, I am pleased to report that we are off to a strong start in Q2. As in Q1, we have limited visibility on how our sales will perform for the balance of the quarter and we know that we will again incur some additional expenses, but we will manage through this with the same mindset we brought to the first quarter.

With that, I would like to talk about some key learnings that we have taken out of the past few months and how we believe we are positioned to win going forward. First, we have a strong balance sheet with plenty of liquidity, which we expect to further enhance when we close the pending sale-leaseback transaction for our 4 owned distribution centers.

Second, our merchandising mix is exactly what our customers want and need today: Food, Consumables and stay-at-home assortments with structurally sound margins. Our ability to lean into closeouts in the months to come will further differentiate our assortment and the value we provide our customers.

Next, we have a loyal customer base, and that has increased in size over the past months. And finally, we have learned more than ever that we have an outstanding team who have become even more effective during the crisis.

These strengths will further support the pursuit of our existing strategies under Operation North Star, where the rollout of key initiatives remain on track. For example, Broyhill is now available on indoor and outdoor Furniture, in Soft and Hard Home assortments. This iconic brand emphasizes our better and best offerings with elevated quality and a compelling value proposition. Across the board, whether it be patio furniture, gazebo sectionals, occasional tables, dining room sets or accent items, including window coverings, fashion bedding and home decor, all have sold through quickly, exceeding expectations despite a delayed marketing launch of the brand as customers spruced up their living spaces with this new collection.

We are increasing the density of the Furniture department by adjusting and enhancing the layout of the furniture pad and adding new fixturing. The configuration of our queue lines, which in some stores moves our cash registers into banks, also frees up square footage in front of the Furniture department. The combination of all these moves will allow us to explore white space opportunities in Furniture, expanding our Broyhill offering or display big buyouts and closeouts across other categories in the front of the store to drive higher revenue, increase box productivity and generate more margin per square foot.

In May, we started the rollout of The Lot and queue lines to existing Store of the Future locations and certain other stores that are in the legacy balance of chain format. Our test of these programs continued to generate strong results with each one generating more than 1 point of comp for the store. The Lot and queue line will also be included in our new stores and Store of the Future conversions this year, and we expect that approximately 750 of our stores will have both before the holiday selling season.

The chain-wide rollout of our pantry optimization initiative will now begin in September. This initiative repositions our Food and Consumables assortments by moving footage from food staples to food, entertainment and Consumables, where we have a higher permission to play. The assortment will include national brands at everyday low prices, coupled with owned brands and closeouts. This compelling offering will allow our customers to find more items on their shopping list in our stores, which we also believe will result in higher frequency of shopping trips. We've added new signage throughout the store that clearly calls out closeouts, big buy alerts and other great deals. We know our customers love the value from these offerings, and we are making it much easier to find them.

Alongside these in-store programs, we expect continued strong growth in our e-comm channel. Q1 was our highest volume quarter since launching the platform in April of 2016. Through yesterday, with BOPIS included, e-comm sales have exceeded last year's full year totals, and the business continued to see growth in profits, with the direct business excluding BOPIS breaking even for the first time.

In addition, we're making meaningful improvements to the online experience with better search, reduced delivery time and expanded payment options. For example, in April, we added Easy Leasing, our popular lease to purchase program to the e-comm platform. LOPIS, that is lease online, pickup in store, as we call it, has been very well received by customers with penetration and online Furniture sales quickly trending up. And we will also be able to accept the Big Lots credit card and Big Lots gift cards online over the summer months.

And finally, the very popular shopping and delivering option Instacart will soon be available for our customers. We believe this is a very important next step in our omnichannel experience, and we are exploring other same-day delivery services for our larger product assortments, including Furniture. The growing popularity of curbside pickup, which we added in Q1, has validated the opportunity we see to grow these convenience options at an accelerated pace to meet the customers' new demands both throughout the crisis and in the post-COVID-19 world.

Turning to expenses. We have continued to make excellent progress on taking costs out of the business and more broadly creating a culture of frugality. Our original cost reduction target of $100 million will be achieved well ahead of schedule, and we believe there is significant opportunity beyond this figure.

With that, I will hand the call over to Lisa, but I'll return to make some additional comments later.

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Lisa M. Bachmann, Big Lots, Inc. - Executive VP and Chief Merchandising & Operating Officer [4]

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Thank you, and good morning, everyone. As Bruce noted, Q1 sales were significantly stronger than expected with comps increasing 10.3%. From a merchandise category perspective, 6 of the 7 businesses were up in the quarter.

Consumables was the top performer, up 27%, with positive results in all departments, which is in line with the dramatic shift in consumer buying trends toward the supplies needed for the pandemic. Paper sales increased nearly 70% in the quarter, and household chemicals, housekeeping products and health and beauty were all very strong. Our team has done a very good job working with our vendor partners to keep these critical assortments in stock as much as possible. Food also posted a very strong quarter, comping up in the low double digits. Similar to Consumables, the strength in Food was broad-based with increases across all departments and notable strength in DSD, dry grocery and beverages.

Soft Home was up high single digits with very good results in nearly all departments, in part driven by our launch of Broyhill. Home decor, including candles, wall art, mirrors and tabletop items, along with decorative pillows and fashion bedding, were all very strong. Our customers have noticed the quality and value in the Broyhill brand, and they have responded in a big way.

Electronics, Toys, & Accessories also increased in the high single digits, driven by strong sales in toys and graphic tees, which were rolled out to the entire chain during the quarter. Seasonal was up in the mid-single-digit range in Q1, which was a very good result considering the puts and takes in the quarter that Bruce described.

Our outdoor living assortments, including the new items in Broyhill, have remained popular in May, and our inventory levels have been selling down quickly.

As a reminder, much of our lawn and garden and summer product is purchased a year in advance and directly imported so it is challenging to chase the season if we're experiencing outsized demand similar to this year.

Furniture was also up mid-single digits, which was a good quarter given that it is on top of a 6% increase in Q1 last year and that February which is normally a sizable month for Furniture sales in the quarter was below expectations. All departments in Furniture posted a positive comp with ready-to-assemble and mattresses producing the best results. And similar to Soft Home and Seasonal, our customers love the newness in the Broyhill collection, in upholstery and casegood items. And finally, Hard Home was down in Q1, which was in line with our expectations as we reduced space in the store and reallocated it to more productive categories.

Before handing the call over to Jonathan, I want to thank our BPARM teams, consisting of buyers, planners, allocation, replenishment and marketing, for their extra efforts during these unprecedented times. They have been working day and night to secure the supplies our customer needs to get through the pandemic.

The dynamics of COVID-19 and the impact on nonessential retailers has created a unique shift in closeout product availability. Over the last few years, our closeout assortment has been highly concentrated in the merchandise categories of Food and Consumables. Very few large closeouts have been available in Furniture and Seasonal, and the closeout opportunities in home didn't necessarily work or coordinate with the quality of our planned assortments in Soft and Hard Home.

As you might imagine, the high demand for Food and Consumables during the crisis has stressed the supply chains and limited the excess product available in these categories. But that is offset by the excess product available in other categories, including Furniture and other home-related items and apparel. For instance, we have recently secured a very good closeout opportunity in children's apparel with girls' tops and shorts now hitting stores. We have an experienced team of merchants, planners and allocators that are well versed in the closeout sourcing model and are quickly pivoting the organization towards these opportunistic buys.

I'll now turn the call over to Jonathan to discuss the numbers.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [5]

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Thanks, Lisa, and good morning, everyone. I would like to add my appreciation for the outstanding efforts of everyone across our Big Lots team and for the tremendous support we have received from our external partners.

Turning to the numbers. Net sales for the first quarter were $1.439 billion, an 11% increase compared to $1.296 billion a year ago. The growth resulted from a comparable sales increase of 10.3% and sales growth from new and relocated stores not in the comp base.

In terms of the cadence through the quarter, comps were down in the high single digits in February for the reasons Bruce outlined. However, in March, sales accelerated to a low double-digit increase as customers stocked up on essentials. That impact faded in late March and early April, which also got off to a slow start due to the canceled Friends and Family event and Easter day closing. Beginning in mid-April, we saw a material improvement in comps that continued through the balance of the month and has further continued into May. April month-to-date comps turned positive roughly 2 weeks prior to quarter end and continued to improve rapidly.

Net income for the first quarter was $49.3 million, up 33% compared to first quarter adjusted net income of $37 million last year. Diluted EPS of $1.26 was up 37% compared to adjusted EPS of $0.92 in last year's first quarter.

The gross margin rate for Q1 was 39.7%, down 80 basis points from last year's first quarter adjusted rate, with the decline resulting from a shift in our product mix toward the lower-margin categories of Food and Consumables and higher shrink. The shrink increase is in line with the higher accrual rate we moved to in Q4 based on the initial results of our annual physical inventory cycle. Our physical inventories in Q1 have been curtailed somewhat by the crisis, but the results we have seen are broadly consistent with what we saw in Q4.

Total expense dollars for the quarter were $496 million, up from the $471 million of adjusted expenses reported for the same period last year. The increase included unplanned expenses of approximately $17 million associated with the crisis response actions Bruce described a moment ago, including temporary wage increases and additional bonuses, new cleaning protocols, supplies and equipment for protecting our customers and associates as well as some other unplanned expenses. However, these incremental expenses were significantly offset by savings relative to plan in other areas and our ability to hold expenses while significantly beating on the top line.

As a result, SG&A as a percent of sales was 34.5% in Q1, representing 180 basis points of improvement compared to last year, even with significant unplanned expenses included. We remain confident in our ability to drive SG&A leverage over time. We have established new cost reduction targets across the business that we believe are aggressive but realistic. Alongside this, we are continuing to promote a broader culture of frugality. Once again, our first quarter results have validated our ability to do more with less.

Interest expense for the quarter was $3.3 million, down slightly from last year as a result of lower debt levels. And the income tax rate in Q1 was 27.3% compared to last year's adjusted rate of 28.1%.

Moving on to the balance sheet. Inventory ended the quarter at $807 million, a 13% decline compared to $927 million last year, with the decline resulting from strong sales in most merchandise categories in the quarter. As part of our initial response to the crisis, we pulled back significantly on inventory receipts, but those actions have now created additional capacity to pursue closeout and other opportunities.

During Q1, we opened 6 new stores and also closed 6 stores, leaving us with 1,404 stores and total selling square footage of 31.7 million. Capital expenditures for the quarter were $29 million compared to $77 million last year, with the decline primarily coming from fewer Store of the Future conversions and no required investment in AVDC this year. Depreciation expense in Q1 was $37.7 million or approximately $4.9 million higher than the same period last year. For the full year, we now expect capital expenditures to be around $130 million to $140 million, representing a significant reduction from our original guidance.

We ended the first quarter of fiscal 2020 with $312 million of cash and cash equivalents and $437 million of long-term debt. This represented a significant improvement in net debt compared to the end of the first quarter of fiscal 2019 when the company had $64 million of cash and cash equivalents and $470 million of long-term debt.

During the quarter, out of an abundance of caution, we chose to draw down additional amounts on our revolving credit facility to provide protection against the unknown potential impacts of the crisis.

As Bruce referenced, we expect our strong liquidity position to be further enhanced by the closing of the previously announced sale and leaseback of our 4 owned distribution centers.

As noted in a separate press release this morning, our Board of Directors declared a quarterly cash dividend for the second quarter of fiscal 2020 at $0.30 per common share. This dividend is payable on June 26, 2020, to shareholders of record as of the close of business on June 12, 2020.

Turning to guidance. At this point, we don't believe we have sufficient visibility to reinstate full year guidance. For the second quarter to date, comparable sales are running up strongly, reflecting a continuation of the acceleration in business that began in mid-April. We expect these trends will moderate over the balance of the quarter due to a number of factors, including competitors and other retailers reopening, the planned cancellation of the July Friends and Family event, potential inventory constraints in certain categories and the abatement of stimulus-driven demand.

Assuming comparable sales for the second quarter similar to first quarter results, we would expect diluted EPS to be in the range of $0.65 to $0.80. This outlook incorporates anticipated pretax expenses related to COVID-19 of approximately $18 million. It further incorporates an approximate $7 million adverse pretax impact from the expected closing of the sale and leaseback transaction for our 4 owned distribution centers but excludes the expected gain on sale from the transaction. Based on quarter-to-date sales, we believe the comparable sales assumption is conservative.

Notwithstanding the prior commentary, given the highly fluid environment and uncertain outlook on consumer behavior, the company believes the range of outcomes is wider than in a normal quarter. We intend to resume the practice of providing formal guidance when business conditions return to a more normal environment.

I'll now turn the call back over to Bruce.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [6]

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Thanks, Jonathan. Before we open the lines for questions, I want to take a moment to once again express my sincere gratitude to the entire Big Lots team, especially our associates in the stores and in our distribution centers. Throughout this crisis, they have been on the front lines each and every day. They are truly heroes, and we cannot thank them enough for their service and dedication.

COVID-19 has changed the world in a short period of time. I believe it has been a defining moment in our 50-plus-year company history. We have forged a new way of operating, a new way of collaborating and a new way of succeeding with a common goal for our company: to serve our customers and our communities in a safe and healthy environment for all. We really don't know what is ahead of us.

But as I mentioned in my opening remarks, sales have been strong in the month of May, and we remain confident and optimistic about the impact of the rollout of our Operation North Star initiatives. I'm also very encouraged by our team's ability to be nimble and pivot towards new opportunities as they become available. As we've learned over the last 90 days, our environment can change quickly and unpredictably, but we will continue to navigate through that as we did in Q1, focusing on doing the right thing and playing our part to help our country return to a more normal footing.

I'll now turn the call back over to Andy.

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Andrew D. Regrut, Big Lots, Inc. - VP of IR [7]

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Thanks, Bruce. Operator, we would now like to open the lines for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today is coming from Chandni Luthra from Goldman Sachs.

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Chandni Luthra, Goldman Sachs Group Inc., Research Division - Associate [2]

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Congratulations on a great quarter. I hope you all are doing well. Is there a way to parse out the impact from stimulus versus perhaps the new customers you acquired in this -- in the last 2, 3 months by the fact that you were open and others were not? And then further, versus your efforts, say The Lot and Broyhill, what are you doing in your efforts to sort of retain those new customers that you acquired?

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [3]

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So Chandni, I'll take the first piece of that and then turn it over to Bruce. I think in terms of breaking out what the impact was of the stimulus versus underlying trend, it's very difficult to do that, quite frankly. We don't know what the world would have looked like had we not have gone through the COVID-19 pandemic. So we've certainly spent a lot of time trying to understand that. But our focus, frankly, has been much more on the second part of your question, which is how do we emerge from the crisis in a very strong position, how do we retain the customers that have come to Big Lots through the crisis and how do we generate more ongoing new business traffic.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [4]

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Yes. I'll take the second part, Chandni. And thank you for your kind words. Yes, Q1 was a roller coaster ride. We saw a lot of traffic early on during the stockpiling phase in March, and actually, in Q1, we saw rewards sign-up up high single digits, actually nearly 10%. So that was good for us.

What we've done to attract more customers are things like going after them in social media. Social media has played a big role. Our customers, like many Americans today, are focusing on trusted brands, trusted companies, and we're becoming a social anchor point for that. Our heroes discount, 15% off, continues today, and that recognizes all the first responders, medical staff out there, our veterans, everyone working very hard. And as they come in and they're new customers, we've offered them bounce back programs like $10 off their $40 next purchase, and we've seen really good response on that. We've also increased and run promotions where, if they become a new rewards customer, they get 20% off, and that's something that we've put on and off. And that compares very good compared to what we normally run, which is usually $5 off their first purchase.

So we're happy to see new customers come in, experience Big Lots for the first time, bounce back, reward, all those heroes out there. So it's been great. And as they come in, they're seeing new things that we've done across the store, whether it's our furniture, our Broyhill lines or our new stores now, The Lot or the queue line that's been rolling out in the first quarter. We're excited to see how they're giving us good feedback.

I will also mention, as I comment, throughout this COVID-19 first quarter, the Net Promoter Scores have been the highest we've seen and the engagement has just been wonderful. And so we're really pleased with what we're doing. We'll continue to lean into new customer acquisition through more branding, marketing, social media, coupled with our promotions and extreme value we offer our customers.

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Chandni Luthra, Goldman Sachs Group Inc., Research Division - Associate [5]

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Great. And if I could just squeeze in a follow-up there. Is there any color you all could perhaps throw on performance by geography, by urban versus suburban markets? Has there been a shift in trend in markets where competitors have started to reopen and lockdown measures have eased a bit?

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [6]

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Yes. I'll start off. And if the team wants to add anything. We've seen across the board in Q1 and even into May just uniform strong trends both across categories, merch categories and geography. There are occasions -- there have been occasions through Q1 when there were lockdown or shelter in home and closed stores where the traffic might be a little lower in one state versus the other, but for the most part, they've all trended upward and we've been uniformly successful across the board.

As the new competition starts opening up in America, I think we have not seen an impact at this point. I suspect that many nonessential retailers, as they open up, are probably getting their legs back and trying to figure out how to staff up and so on. We have not seen a marked decrease in our business as a result of that. So I think time will come -- will tell. We'll see more impact as more stores open up and there's more opportunity for customers to spend across the board. But right now, we've not seen any geography change versus another. I would say locally, in terms of urban versus rural, we've been strong in both areas.

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Operator [7]

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Our next question is coming from Peter Keith from Piper Sandler.

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Peter Jacob Keith, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [8]

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Congratulations on the great results. I was hoping maybe, Bruce, you could talk to Q2. It sounds like there's pretty broad-based strength and so perhaps no negative mix shift like you saw in Q1 with Consumables. Just based on the EPS guide, it seems like you might be baking in some gross margin pressure. So I want to kind of understand the context of the mix and how you guys see gross margin shaping up for the quarter.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [9]

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Yes. I'll start and then hand things off to Jonathan or Lisa. But we continue -- since the stimulus checks, unemployment checks, we've seen strong growth from about mid-April across the board, across multiple categories -- all categories, quite frankly, and that's continued into May with strong results in May. I think for the most part, we think, at some point, the stimulus checks and unemployment checks might start to wane, but we're out of the gates very strong across the board in May.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [10]

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Yes, Peter. And just to add a couple of points on the sort of P&L. And from a gross margin rate standpoint, in Q1, about 50 basis points of the erosion year-over-year was due to the mix effects we spoke to. So based on where we are today, we don't anticipate that being the same in Q2 since the mix has evened out more in Q2. But we do still have a focus on a little bit of margin rate erosion year-over-year.

I think what you're probably seeing in expenses, we obviously believe we did an extremely good job in Q1 of keeping expenses very tight, actually reducing expenses significantly on an underlying basis even while sales were going up, and that obviously was offset to a significant degree by some of the onetime expenses. We did pull back on a couple of line items like marketing, where we are planning to fund a little more into that in Q2. We do think it's important that we take this opportunity to bring in new customers or retain customers that have shopped Big Lots over the last couple of months. So we are looking at deploying some more marketing expense in Q2, and that's baked into the outlook.

And I would say beyond that, we're going to continue to move forward with this mindset of frugality and as we did throughout Q1, look to try and reduce the expenses that we have in our forecast. So hopeful we could get a better result than what you're seeing baked into that, but we don't want to count on that until we've actually got it locked in.

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Peter Jacob Keith, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [11]

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Okay. That's helpful. And maybe a separate question, again, to Jonathan. On the real estate sale of the 4 DCs, could you provide some updated thoughts on the accretion of that transaction? With share price now indicating above $40, it's certainly much different than when the share price was in the mid-teens and the terms were finalized. And on that note, too, if and when the deal is closed, is there anything that would hold up a share repurchase authorization in the near term? Or would this be something that authorization would have to wait for a number of quarters?

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [12]

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Peter, yes, I'd be happy to respond to all that. So

first of all, we feel extremely good about how quickly we've moved through this transaction, particularly in the difficult background context. And I'd like to express my public appreciation for everybody on our team and our folks on Oak Street who have moved expeditiously through this. And we do believe we're pretty close to closing that.

Once we've closed the transaction, our overall perspective on use of proceeds is the same as what we announced in our April 8 press release when we announced the sale leaseback. We intend to pay down our revolving credit facility. We're going to retain some additional liquidity, which we think is appropriate in the current environment. But then we do, as conditions start to normalize, expect to deploy the remaining proceeds for other purposes, including investments in growth, but also potential share repurchases, subject, obviously, to a new share repurchase authorization from the Board. That remains part of our thinking.

With regard to share repurchases, generally, our view is we will continue to view that as an appropriate use of excess liquidity when the stock is priced attractively on a long-term basis, and that hasn't changed. So beyond that, we will be more specific when we get to that.

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Operator [13]

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Next question today is coming from Joe Feldman from Telsey Advisory Group.

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Joseph Isaac Feldman, Telsey Advisory Group LLC - Senior MD, Assistant Director of Research & Senior Research Analyst [14]

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Congratulations on the quarter. I wanted to ask about inventory. You touched on it a little bit. Supply chain seems like it's okay but maybe some constraints in some areas. Can you talk a little bit more about where inventory stands today and how you feel -- I would imagine down 13% is not quite where you'd like to be. And presumably, if you had more, you'd even fuel sales higher. So just maybe talk about that a little bit, where -- how we should expect that to play out in the second quarter and beyond.

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Lisa M. Bachmann, Big Lots, Inc. - Executive VP and Chief Merchandising & Operating Officer [15]

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Joe, I'll start there and maybe hand back over to Jonathan. But to your point, the inventories came in down 13% in the quarter. We saw very high sales volume across all of our merchandise categories in the quarter. If you think about, as I stated, lawn and garden, that is definitely in a sell-down position. So again, we'll see fewer markdowns as a result of that.

But as we look to the balance of our supply chain, I will say that there has been some stress, like I'm sure you've seen in many industries, where we've experienced some disruption, but it's been fairly short term with our domestic suppliers as they too have experienced perhaps some COVID-related illnesses. But we're pretty much -- from a domestic perspective within those key areas, pretty much getting back on track there.

I think Food and Consumable vendors, it's just been such unprecedented demand that we have seen. So we continue to chase there. But I think part of the silver lining here is we've really opened up a lot of open to buy for us to go after closeouts in this unprecedented environment with really quality closeouts that are out there. So that's going to also help balance some of the things that we are chasing. We'll start to see on a weekly basis actually now really great quality closeouts hitting our stores. The team is being very aggressive. We've gone out after current vendors, new vendors, and we've had many vendors that are coming forward to us because of some of their retailers that have -- either were closed or experiencing difficulty in their sales demand.

So I'd say, overall, we also feel that we can do more with less. So we have experienced great inventory turns throughout the quarter. And at the same time, we want to be able to true up the key categories that need that additional inventory, but we certainly have learned that we can really turn our inventory tighter. But again, excited about also the opportunity for the closeouts that are in the environment right now.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [16]

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Maybe just to add a little shout-out there for Lisa's team. I mean, I think we put them through a lot over the past quarter. We -- as this crisis started to unfold, we didn't know what was going to come, and we chose to move in a very conservative direction and ask people to take out significant receipts. And then as we obviously did far better than those lower case scenarios, we had to then start chasing back into that. I think it's been remarkable how nimble the team has been in adjusting our inventory levels to where we need to be to support the business.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [17]

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I'd also add one other thing, Joe. The -- our vendor partners have just been outstanding working with us, and we've done creative things to get product from them to us and to our customers. So just a shout-out to all our partners there.

I think for the most part, China is back on track. Vietnam's okay too. India is still struggling a bit. And the domestics, as Lisa said, are getting back on track. So feel good about the future.

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Joseph Isaac Feldman, Telsey Advisory Group LLC - Senior MD, Assistant Director of Research & Senior Research Analyst [18]

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If I could follow up on the closeout. Thanks for getting into that, Lisa. With regard to those, should we expect them in beyond the categories that you see? Like you mentioned in the prepared remarks like apparel and seeing some good stuff in kids, which is not typically where you guys are focused. I'm just wondering, will it be things like that? Or will it be more focused on, "Okay, within the home furnishings or the furniture area, here's a great deal that we got" and how we should think about that going forward?

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Lisa M. Bachmann, Big Lots, Inc. - Executive VP and Chief Merchandising & Operating Officer [19]

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Joe, we're seeing opportunities across all of the categories that we traditionally do business with, first and foremost, so -- whether it's Furniture, Soft Home, Hard Home, electronics. So we're really going to see incredible deals across the business. But we're also very much open for what we call white space opportunities, and apparel is a category that we've spoke about it in the past as something that we believe we have a right permission to play from our customer. And we have recently introduced into The Lot apparel and our graphic tees, which have been very well received, but that's just a perfect example of the white space opportunity that we're going to go after.

I think we're giving ourselves the permission here to really open up and look at all opportunities that are available. Again, we have a really experienced team that's involved with helping to secure these closeouts. And not only that, but with our store team leaders as well as our merch/price team, we really know how to create that exciting environment in store. So it's really, again, an exciting time and opportunity for us that we're going to maximize.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [20]

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If I could just add on, Joe. I'm really excited about Lisa and the merchandising team, what they're doing to lean into this area. We kind of treat this area in this time in our business as an innovation time, an incubation time, if you will. There's a lot of opportunity to sell a lot of things in white space and closeout, and this is going to be fun. It's going to be fun to test into it this year.

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Joseph Isaac Feldman, Telsey Advisory Group LLC - Senior MD, Assistant Director of Research & Senior Research Analyst [21]

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Great. And if I could sneak one more in just on the Consumables and Food. Given the strength, and I know a lot of it has been pandemic-related, are you rethinking that category at all? I know you've been undergoing a space optimization there. But has the latest couple of months given you any pause or rethinking on that?

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Lisa M. Bachmann, Big Lots, Inc. - Executive VP and Chief Merchandising & Operating Officer [22]

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Joe, we've always believed in the Food and Consumable business. And we have remixed some of the products within the Food department, as we've been talking about, over the past several quarters. And with pantry optimization coming into our stores in the September time frame, that -- I think that's just going to take the assortment to the next level, really giving our customers those everyday brands that she would expect to see from us. They'll also be there on closeout as those availabilities become available, but we'll also be able to offer her those national brands every day very competitively priced. So we're continually looking at that assortment. But from what we've seen and what she's coming for from a stock-up standpoint, we're encouraged with what we've done with pantry optimization as it's only going to help to fuel the demand that we're seeing from her.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [23]

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And I'll just add a couple of other things. I think Lisa answered that very thoroughly, but just -- there's really 2 types of customers -- I mean there's many types of customers that shop us, but when you boil it down, there's an everyday customer, we call her Everyday Jenny; and there's that destination shopper, Destiny, if you will. Everyday Jenny, she's coming in for that Food and Consumables business, and we've got to make sure we have it. So as we lean into Operation North Star and the strategic initiatives we're going after there, from the queue line which makes more space up in the front area of the store to the pantry optimization as Lisa talked about, our offering is compelling because we've got everyday low prices on brand names so she can shop further down her list on those 50 shopping journeys a year or so. And we also have closeouts or big buy alerts that give a 10% to 40% discount right next to it.

And as Lisa mentioned in her remarks, new signaging that allows that new customer and customers to find that value as they shop through our stores is something that's coming this year. We've already started rolling it out. So we also have space throughout the store where we can disrupt with more Food and Consumables. So I think our focus is on that everyday traffic driver. That means that we could expand in those areas throughout the store while not losing the destination shopper with the high big-purchase items in the Furniture, Soft Home, Seasonal categories.

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Operator [24]

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Our next question today comes from Matthew Boss from JPMorgan.

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Matthew Robert Boss, JP Morgan Chase & Co, Research Division - MD and Senior Analyst [25]

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Great. And congrats on a nice quarter as well. Bruce, maybe to continue the closeout conversation. I think today, it's 9% to 10% of the mix. In the past, it was close to 50% at peak. Any way to think about a target for closeouts as a percent of sales and just the time line for change, how we should think about the magnitude of this change? And then just any other larger structural changes to the model that you're considering out of the crisis?

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [26]

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Good question, Matt. We're not really giving goals yet in terms of closeout penetration. And some of the closeouts we're going to do will be engineered big buys, et cetera. But I know that it will be more than the overall store box of 9% to 10%. I think there's still room in the Food and Consumables business, which right now penetrates around 25%. And once again, having clearly designated areas in the aisles and end caps and so on that bring that to life, I think, will help out as well.

As you heard Lisa say earlier in the conversation, the closeouts that we're looking at this year are across all categories. And they're good quality closeouts, and we're rekindling all those relationships. We've got a lot of muscle. We're building dashboards that we review weekly. And we're also -- Lisa has got everyone going through the art of the deal, training classes and so on, just bringing that back across the other categories other than Food and Consumables.

So it's early for us to share what those goals look like, but we're excited about it. We're excited about rekindling those partnerships. And I wish I could tell you the details of the closeout deals that we've secured so far. I really want to tell you that, Matt, but I don't want to give away our secret, so to speak. But we're excited about the value.

Now as we look at where the customer is today, the good thing about our business is value never goes out of style, it just doesn't in America. It's always in style. And then given the pandemic that we're all suffering through here, it's even more in style. And we're leaning into that. Having this good price -- good quality priced product and the extreme value with the ease of shopping and all the other benefits we do is something that we're excited about leaning into even more so.

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Matthew Robert Boss, JP Morgan Chase & Co, Research Division - MD and Senior Analyst [27]

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Great. Okay. Look forward to those, what the team has done. It's just us friends on the call so you could share anything.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [28]

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I got you, Matt.

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Matthew Robert Boss, JP Morgan Chase & Co, Research Division - MD and Senior Analyst [29]

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On -- as a follow-up on gross margin, Jonathan, maybe what do you see as the right long-term sustainable gross margin for the company as maybe we look back and think about 40% to 41% was past peak levels? And just beyond this year and all of the noise related, so how would you rank gross margin drivers from here?

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [30]

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Sorry, Matt, I didn't quite catch the second part of the question.

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Matthew Robert Boss, JP Morgan Chase & Co, Research Division - MD and Senior Analyst [31]

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Just gross margin from here, how would you rank the drivers and how to think about the sustainable long-term gross margin for the company relative to 40% to 41% peak in the past?

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [32]

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Yes. I think overall, Matt, we're probably not ready to give you a precise answer on that today, but there's been a lot of moving parts in that business. A lot of things are changing kind of as we speak and have over the last couple of months. So I think we still need to get greater visibility on what the shape of our business is going to be by category going forward which will drive that.

I think what we have seen is the extremely powerful impact of top line leverage on our business when we can get our sales up, even if that entails a bit of investment in margin or potentially in SG&A at some point. We're likely to get a very strong return for that. So I think overall, it's hard for us to be sort of too precise about where gross margin rate is going to go. It's always going to be influenced by mix.

So I think we are proving that at this current gross margin rate, we can drive incremental productivity or something very close to our current gross margin rate. And I think the most important thing for us to do is to continue to drive top line productivity. And the margin rate is also extremely important, but what we need to do on margin rate will be partly a function of where we're going on the top line.

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Operator [33]

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Our next question today is coming from Paul Trussell from Deutsche Bank.

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Paul Trussell, Deutsche Bank AG, Research Division - Research Analyst [34]

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My congratulations as well on outstanding results. The digital growth sounds encouraging and, as you mentioned, is becoming a bigger part of the business now. Maybe talk a bit more about how you're positioning the company to really attack that digital growth opportunity. And maybe highlight for us how we should think about the partnership and the assortment that would be on Instacart.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [35]

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Yes. Paul, thanks again. E-comm is something that we started leaning into in a more significant way last year when we launched our BOPIS -- accelerated BOPIS. And I'm happy to say that in Q1, our e-comm with BOPIS was 4x last year Q1, and that's very exciting for us. And as you heard me in the remarks say, just recently, we did in the first part of this year volume equal to all of last year. So it is something that, given this pandemic, has accelerated, omnichannel retailers or the people or companies going towards the convenience around the customer, and we're well positioned for that. And we, in a very scrappy way, launched curbside pickup as well in Q1, and that's been growing exponentially alongside of the BOPIS.

The addition of Instacart, think of it in a way of anything that fits in the back of a sedan for same-day delivery, fairly much small items. We partnered up with them. We've sealed the deal, and that will be rolling out shortly and coming soon. But that's just the beginning. We've got other same-day delivery options that we plan on moving towards later this year that will help our customers order and have delivered items beyond the back of the sedan or the trunk, if you will, all the way up to furniture and delivery to their home and eventually to white-glove treatment and competing in those areas.

We want to remove all the friction that we can, a very productive and profitable way to grow our business both through brick-and-mortar and online and especially during this time where people are focusing on increased localism, home-centric lifestyle, protective health and obviously digital acceleration, and once again, adding to all of that, bringing all the other convenience we have with buy online or lease -- Easy Leasing, so LOPIS, the credit card online, all of that together. We see this as an opportunity to continue to grow with her needs and continue to penetrate at a higher level the e-comm sales in total versus total sales. So we see it as a major growth opportunity and a profitable one at that.

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Paul Trussell, Deutsche Bank AG, Research Division - Research Analyst [36]

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Turning back to SG&A. You're well on track to meet your goals. Maybe just touch into a bit more detail for us on where you're finding those additional savings and just also what we should keep in mind as it relates to what kind of COVID-related expenses were for 1Q and expected for 2Q.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [37]

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Yes. So the COVID -- I'll start with the second piece, Paul. As we called out in our prepared marks -- prepared remarks, the COVID expenses in Q1 and Q2 were $17 million, $18 million, basically in both quarters, so pretty consistent. And then in Q2, that bakes in the continuation of the $2 hourly rate increase through the end of our fiscal month of June. So that's sort of where we are on that.

Overall, with regard to SG&A, the original $100 million target was comprised of significant store payroll component, indirect expenses, non-merchandise expenses was a big piece of it, various other store components and then central office components. As we're looking at the next leg of opportunity with that $100 million pretty well secured, we're again looking across the entire P&L, so continuing to look at stores, looking at supply chain, looking at rent opportunities and really trying to identify everywhere where we think we have meaningful opportunities. And so we've established targets. We've -- the teams are now working against those.

And then there's also a broader kind of cultural piece beyond that, which is how do we just make sure the entire organization is thinking frugally about our business every day. Every dollar is examined to make sure we really believe it has an ROI. We don't leave anything on the table. And I think we've really done a great job on that over the past quarter, of getting people more and more in that mindset. When the crisis came along, it obviously accelerated some of that thinking. And we want to keep that going. It's just one of the many areas where we think we've got great momentum through the crisis, and we want to make sure we keep that going forward.

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Operator [38]

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Our next question today is coming from Liz Suzuki from Bank of America.

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Elizabeth Lane Suzuki, BofA Merrill Lynch, Research Division - VP [39]

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Just a question on Easy Leasing penetration. How high did it get in this quarter for Furniture specifically and, I guess, for Seasonal products, which are the 2 that are usually offered with Easy Leasing? And just if you could give any comments on the competitive environment for lease to own, I would appreciate it.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [40]

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Yes. I'll start off. And thanks, Liz. Easy Leasing, our partners at Progressive continue to be great partners with us. Our Easy Leasing, just to let you know, they as partners actually helped their customers, our customers by giving them breaks through this COVID pandemic, and the default rates have been extremely low. So it just shows what good partnership we have with them. Really proud of what they've done and what we've done.

But Easy Leasing continues to penetrate at a good amount, high teens in terms of overall furniture sales. We did see a slight reduction in the basket in first quarter. Typically, that basket could be around $700 or so. It decreased slightly, and we believe that was because with stimulus checks and so on, care packages, if you will, more customers went to just direct buying. But we still saw strong results in the Easy Leasing program. It's still a great differentiator. And now with lease online, pick up in store, we're seeing that penetrate at a very nice level of overall Easy Leasing. So it's been a good run.

Lisa, anything else to add?

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Lisa M. Bachmann, Big Lots, Inc. - Executive VP and Chief Merchandising & Operating Officer [41]

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I think the only other thing I would say is that the Easy Leasing customer is penetrating very heavily into our rewards customer. So there's over 50% crossover there and growing.

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Operator [42]

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Our next question today is coming from Brad Thomas from KeyBanc Capital Markets.

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Bradley Bingham Thomas, KeyBanc Capital Markets Inc., Research Division - Director and Equity Research Analyst [43]

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I want to follow up on Store of the Future and some of the other investments you all are making in the stores. Clearly, some exciting things happening with The Lot and the Q. I guess could you talk a little bit about how you're thinking about what your store should look like for the next 5 years and what you're trying to learn during this time and when you might be in a position to come out with a new capital plan and remodeling plan?

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [44]

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Yes. Thanks, Brad. I'll start off and then kick it over to Jonathan and Lisa. But just to answer your Store of the Future, I mean, right now, in Q1, we'll have approximately 400 stores that will comp Store of the Futures stores, if you will. And just to give you a little color on it, our balance of store -- balance of chain stores actually performed very well compared to our Store of the Future, just slight differences in Q1. We're just planning 65 more Store of the Futures in 2020, and that will bring our total to 531 in total for 2020. 24 of those will be new, 22 remodels, the rest will be in what we call blend and extend.

We still consider this, like when I started, a platform for growth, a standardization, a refurbishment, if you will, not necessarily a strategy for growth. What we like is -- are the things that you've talked about in your question, which is adding higher growth, higher return on investment, strategic initiatives like The

Lot, the queue, pantry optimization, Broyhill, e-comm. So if you think about how I think about the future of the store, it's basically we do need to evolve the store, and that really means light touches on renovating them, remodeling them, moving them when they're in unproductive areas. And we'll always do that, but in terms of -- and refreshing them so they look and meet the brand standards. But our focus is really on high-returning strategic growth initiatives like The Lot.

The Lot, for example, right now, we'll be at 510 stores in May. We'll have nearly 750 stores by holiday that will have The Lot, and they're comping nicely, about 1 point of comp with 500 square feet in light investment, focusing on those life occasions where you get high-traffic frequency and an urgency because you know that product is not going to stay forever and that's that surprise and delight. In the queue line, which is now -- by the end of May will be in about 270 stores and by holiday, 750 stores, 751 stores, once again, near comp -- 1 point of comp that it adds to the store, high ROIC, low investments, space savings that allows us to add more product right in the front of the store. Whether it's increase to the furniture pad if that makes sense in that store or more disruptive closeout, big buy alerts in Food, Consumables and other categories, all of that is what we're looking at.

So basically, what does the store look like in the future? It looks like a refresh that we'll be working on. It looks like more disruption of extreme value across multiple categories. And it looks like merch innovation with things like The Lot, the queue line and many other things that Lisa and her team are working on our merch innovation pipeline.

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Bradley Bingham Thomas, KeyBanc Capital Markets Inc., Research Division - Director and Equity Research Analyst [45]

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That's very helpful, Bruce. And Jonathan, if I could ask a housekeeping item. On the sale leaseback, I think you quantified $7 million of incremental costs from leasing those properties in 2Q. Can you just correct my math? On an annual basis, it looks like that might be about $50 million. Am I in the ballpark with the annual rate?

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [46]

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Yes, that's assuming about 2 months' worth of impact in Q2.

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Operator [47]

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Our next question today is coming from Karen Short from Barclays.

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Renato Oscar Basanta, Barclays Bank PLC, Research Division - Research Analyst [48]

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This is actually Renato Basanta on for Karen. Congratulations on a nice quarter. So you mentioned sales continued to be strong into 2Q, basically gave that 10% comp scenario. Are you willing to tell us what actual comp has been in May? Maybe just discuss the magnitude to which May accelerated versus 1Q.

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [49]

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Yes. I think I'm going to repeat the question. Just let me know if I got it right. You wanted to get insight into what Q2 comp was looking like and maybe in May. Is that correct?

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Renato Oscar Basanta, Barclays Bank PLC, Research Division - Research Analyst [50]

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That's right. Like if you...

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [51]

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I'll let Jonathan...

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [52]

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Yes. We're not going to sort of parse it out more than we have in our prepared comments. We said comps are up strongly in May, and clearly, we're implying that they're above the outlook we've given for the quarter as a whole at this point. But as we stated in the prepared remarks, there are a number of reasons why we expect comps to moderate over the balance of the quarter.

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Renato Oscar Basanta, Barclays Bank PLC, Research Division - Research Analyst [53]

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Okay. And then just wondering if you can provide a little bit more color on the health of your core customer. Clearly, there's a lot of stimulus out there, but also a lot of trepidation about unemployment, et cetera. So wondering how she is managing and feeling. And do you think most of the impact of the stimulus checks is now behind us? Or is there still some spending power out there?

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [54]

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It's a good question on the health of the customer. I think that the customer, like all of us, had a ride over the last 90 days or so. But right now, the customer spending power is very strong with the stimulus packages. I don't know, I think we still have more distributed and there may be more coming as we watch government proceedings, but it could dissipate. At some point, it will dissipate to some degree. Unemployment checks remain healthy. So right now, the buying power of our customers is very strong and continues to be through May at least.

I think that we're very well positioned. Once again, I think the customer is, like all of us, went from panic to acclamation. I think we're started entering some level of recovery at this point and maybe a return to a new normal that looks like our post -- our past normal. And through all this, the themes that we're seeing that the customer is facing is increased localism on trusted brands and companies and neighborhood discounters like Big Lots, a home-centric lifestyle. They not only need to store and bulk up on their products, but they also want to make sure their work environment from home and their living conditions at home are better. They're thinking about protective health, which is they want to trust that the retailers they shop are keeping up with the cleaning. And our team out there, our frontline heroes have done a fantastic job doing that. And their personal health and wellness, those product categories, we've got for them as well.

Once we -- once again, the digital acceleration and the way that we're positioned to get after that from our e-comm business, BOPIS, LOPIS, curbside pickup and now Instacart and beyond, I think that's going to continue to be something she expects. And then cash constraint, whether it's now or in the future or always, we'll see that raising its head a little bit more than ever, and so are leaning into big buys, closeouts and giving her more ways to shop with us in a convenient, high-valued, cash constrained way, I think, is going to resonate really well. So I think the customer is strong right now. And I think we're really well positioned for now, next and later.

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Renato Oscar Basanta, Barclays Bank PLC, Research Division - Research Analyst [55]

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Okay. That's very helpful. And then just a last quick one. Can you provide us with the actual traffic and ticket breakdown in the 1Q comp?

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Bruce K. Thorn, Big Lots, Inc. - CEO, President & Director [56]

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Traffic and ticket breakdown for the Q1, Q2 comp is what he said.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [57]

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I don't know that we've typically broken that out, so...

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Renato Oscar Basanta, Barclays Bank PLC, Research Division - Research Analyst [58]

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On 1Q specifically?

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [59]

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Yes, we typically haven't broken that out.

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Operator [60]

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Our next question today is coming from Anthony Chukumba from Loop Capital Markets.

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Anthony Chinonye Chukumba, Loop Capital Markets LLC, Research Division - MD [61]

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Let me add my congratulations as well on a very strong quarter. Most of my questions have been asked at this point. I did just have a slight clarification. You talked about comps by month, and you gave a lot of really good color. But what was the comp for the month of April? I mean I know you mentioned that it accelerated after -- it sounds like, significantly after the stimulus checks first started to hit. But I was just wondering if you could just give us a little bit more granularity in terms of what that comp was for the month of April.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [62]

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Yes. Anthony, thanks for the comments. Yes, we did, I think, as you said, give a pretty good amount of color on that. So we're again probably not going to parse that out any further. But April started out slow. We've seen the dip after the stock-up period. And then we also had the Friends and Family event we didn't run, which was a significant headwind. And then the Easter day closing, which was also a headwind.

And then a couple of weeks before the end of the month, we flipped into positive territory as we began to see that stimulus impact. And then that, as we said, escalated rapidly through the end of the month. But probably can't really provide much more color than that.

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Anthony Chinonye Chukumba, Loop Capital Markets LLC, Research Division - MD [63]

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Okay. Fair enough. And then just one quick follow-up. Obviously, we're in kind of strange times. So maybe this isn't the right time for this, but I was just wondering if you had any color in terms of rescheduling your Analyst Day.

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Jonathan E. Ramsden, Big Lots, Inc. - Executive VP, CFO & Chief Administrative Officer [64]

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Yes. There's nothing specific yet to announce on that. I think obviously, we need to wait a little longer until things settle down a little further. But we do look forward to the opportunity to do that and to talk about -- more about many of the things that have come up on the call this morning.

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Operator [65]

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Ladies and gentlemen, we've reached the end of our Q&A session, and I will now close the call with replay instructions. A replay of this call will be available to you by 12 noon Eastern time this afternoon, May 29. The replay will end at 11:59 p.m. Eastern time on Friday, June 12, 2020. You can access the replay by dialing toll-free 1 (877) 660-6853 and enter the replay confirmation number 13703921 followed by the #. The toll number is 1 (201) 612-7415 and enter replay confirmation number 13703921 followed by the #.

Ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect.