Big Lots Is Gearing Up For a Blow-out Year

Before you go, we thought you'd like these...
Before you go close icon

Big Lots is based in Ohio. And as a resident of Ohio, it's been difficult watching the company's fundamental measures of performance slide quarter after quarter.

Source: Big Lots

The fourth quarter marked the eighth consecutive quarter of declining same-store sales, a measure of year-over-year growth. But that's all about to change when Big Lots starts offering its customers a way to finance furniture. This strategy helped Conn's  grow earnings by 37% last year.

It's a bold prediction, but I'm confident Big Lots will break its negative same-store sales streak this year. Financing furniture may not seem like much of a strategy, but it has the potential to revolutionize Big Lots' business model. David Campisi, the CEO, had this to say about the program on the last earnings call:

As we look to 2014, the business will be engaged in rolling out [a] furniture financing program to a majority of our stores. We have tested this concept for [more than] six months now and have consistently experienced high single to low double-digit increases in furniture sales at the store level.

The financing program is much like the one offered at Rent-A-Center or Aaron's. Customers are extended credit to buy furniture; if their credit is too low, they can opt for a rent-to-own plan. Make no mistake about it: this is a form of sub-prime lending, and the company is offering it at a time when credit is tight, which will only increase the program's rate of adoption. The speed at which investors will start to see an increase in same-store sales growth and earnings is only a function of how fast the financing program is rolled out.

Let's talk a little about where all my confidence in this program is coming from. The name of the company is Conn's, and it had same-store sales growth of 35% last year along with bottom-line growth of 37%. There's nothing really all that special about Conn's from a business perspective. It sells furniture and consumer electronics at market prices; so where is all this growth coming from?

Conn's is one of the only "retailers" that also has a rent-to-own financing program. Rent-A-Center and Aaron's are known primarily for renting furniture, whereas Conn's is a retailer with a subprime financing program. According to Conn's 2013 10-K filing: 

Our credit offering provides financing solutions to a large, under-served population of credit constrained consumers who typically have credit scores between 550 and 650.

We believe our large, attractively merchandised stores and credit solutions offer a distinctive shopping experience compared to other retailers that target our core customer demographic.

This is exactly why the program is going to be so successful at Big Lots.

Big Lots deserves some success. Management has been throwing whatever it can find at the walls hoping something will stick, and it finally found a winner. Not only is furniture already a growth area for the company, but it has high margins. Offering credit to the subprime market has the ability to add tremendous value to Big Lots in the long term, and it may even help the company to report positive same-store sales for the first time in two years.

Your credit card may soon be completely worthless too
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement. Click here to watch this stunning video.


The article Big Lots Is Gearing Up For a Blow-out Year originally appeared on

C Bryant has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

People are Reading