Can Big Lots Make Rivals "Ship Their Pants"?

Maybe Big Lots is hoping it can make its rivals quake in their shoes by bringing out the big guns: The closeout retailer announced it hired Andrew Stein as its senior vice president and chief customer officer.

The name may not mean much to you, but he's one of the people behind Kmart's critically acclaimed "Ship My Pants" advertising campaign whose YouTube video has generated some 19 million hits.

Not that the ad really turned around the worsening situation at Kmart or its parent, Sears Holdings , as revenues fell due in large part to store closings, but same-store sales sagged, too. Rather ironically, considering the success of the marketing campaign, Kmart actually experience the greater drop in comps, down 2.1% from the year-ago period.

But Big Lots has its own worries to contend with. While second-quarter earnings easily surpassed analyst expectations, it was forced to cut its full-year guidance for the second time. The closeout retailer expects adjusted earnings of between $2.80 and $3.05 per share for the fiscal year, down from its earlier forecast of $2.87 to $3.12 per share. Net sales are expected to remain flat or increase by at best 1%, while same-store sales are expected to remain flat or drop by 1%. Previously it forecast net sales to rise 1% to 2%.

Such a bleak outlook isn't causing Wal-Mart , Target, or Dollar General, for that matter to lose any sleep, let alone seek out a fresh pair of drawers. Still, with the economy remaining uncertain and retailers generally anticipating a pretty weak Christmas shopping season, no one's out there making bold predictions.

Wal-Mart, in fact, sounded a lot like Big Lots when it reported results, saying comps had fallen by 0.3% compared to an expected 1% rise by Wall Street and revenues at $116.9 billion came in light compared to estimates. There's a reason the retail king is "cautious."

But Big Lots' woes might be tied to a huge shortcoming in its operations as opposed to needing some smart advertising. The deep discounter doesn't have an online presence, and in a period when that's becoming a preferred way to shop, it's a big hurdle that seems hard to surmount.

Sure, Big Lots has a website, but other than looking at this week's flyer, you can't do anything there. You can't buy from it, which really, in this day and age, is rather mind-boggling. To a certain extent, it's understood that the nature of the business may preclude it from offering sales. After all, Ross Stores and Fred's also don't have shopping-cart-enabled sites, and Tuesday Morning recently said it was closing down its e-commerce site. But to be successful and grow these types of retail operations, that might not remain an option much longer. TJX, the parent of closeout clothing retailer T.J.Maxx, realized that and recently said it's launching a site for its stores.

While website sales is a situation Big Lots plans on addressing sooner or later, with competition particularly acute this year, I can't see the closeout retailer getting close to making any big gains because of it.

The competition is heating up
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