8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):March 9, 2007

BIG LOTS, INC.

(Exact name of registrant as specified in its charter)

Ohio	1-8897	06-1119097
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

300 Phillipi Road, Columbus, Ohio 43228

(Address of principal executive offices) (Zip Code)

(614) 278-6800

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On March 9, 2007, Big Lots, Inc. (“Company”) issued a press release and conducted a conference call/webcast, both of which reported the Company’s unaudited fourth quarter and fiscal 2006 results, provided initial guidance for fiscal 2007, communicated a three-year outlook, and announced that the Company’s Board of Directors (“Board”) had authorized the repurchase of up to $600 million of the Company’s common shares. Attached as exhibits to this Form 8-K are copies of the Company’s March 9, 2007 press release (Exhibit 99.1) and the transcript of the Company’s March 9, 2007 conference call/webcast (Exhibit 99.2), including information concerning forward-looking statements and factors that may affect the Company’s future results. The information in Exhibits 99.1 and 99.2 is being furnished, not filed, pursuant to Item 2.02 of this Form 8-K. By furnishing the information in this Form 8-K and the attached exhibits, the Company is making no admission as to the materiality of any information in this Form 8-K or the exhibits.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) On March 9, 2007, the members of the Board who are not officers of the Company and who are not involved in the daily affairs of the Company (“outside directors”), upon the recommendation of the Compensation Committee of the Board (“Committee”), took the following actions with respect to executive compensation: (i) approved the fiscal 2007 salaries and bonus opportunities for the Company’s executives, including the principal executive officer, principal financial officer and the other officers included as the named executive officers in the Company’s 2006 proxy statement (collectively, the “named executive officers”); (ii) determined that bonuses will be paid for fiscal 2006 under the Big Lots 2006 Bonus Plan (“2006 Bonus Plan”); (iii) approved the fiscal 2007 performance criteria (as defined below) devised by the Committee under the 2006 Bonus Plan; (iv) approved an amendment to the employment agreement of Steven S. Fishman, the Company’s Chairman, Chief Executive Officer and President; and (v) approved non-qualified stock option awards and restricted stock awards for the Company’s executives, including the named executive officers, pursuant to the Big Lots 2005 Long-Term Incentive Plan (“2005 Incentive Plan”). These actions are described in greater detail below and in the applicable exhibits.

Salary

As it does annually, the Committee reviewed the compensation of the Company’s executives, including the named executive officers, in light of its compensation philosophy, practices and policies. Following its review, the Committee recommended to the outside directors, among the other components of executive compensation, the fiscal 2007 salaries for the Company’s executives. The table below sets forth the fiscal 2006 and fiscal 2007 annual salaries for the named executive officers. The fiscal 2007 salaries will become effective on March 25, 2007. The actual salary earned in fiscal 2006 will be reflected in the Summary Compensation Table of the Company’s 2007 proxy statement.

Name and Position	Year	Salary ($)
Steven S. Fishman	2006		960,000
Chairman, Chief Executive Officer and President	2007		1,025,000
Joe R. Cooper	2006		375,000
Senior Vice President and Chief Financial Officer	2007		400,000
Brad A. Waite	2006		520,000
Executive Vice President, Human Resources, Loss Prevention, Real Estate and Risk Management	2007		535,000
John C. Martin	2006		475,000
Executive Vice President, Merchandising	2007		500,000
Lisa M. Bachmann	2006		400,000
Senior Vice President, Information Technology / Merchandise Planning and Allocation	2007		415,000

Bonus

On March 9, 2007, following a review of the Company’s performance in fiscal 2006, the outside directors and Committee determined that the performance criteria established under the 2006 Bonus Plan in February 2006 were satisfied at the stretch (maximum) level. Accordingly, bonuses will be paid to the named executive officers and other participants under the 2006 Bonus Plan for fiscal 2006.

On March 9, 2007, the outside directors approved the fiscal 2007 performance criteria recommended by the Committee which, if met, will provide a bonus under the 2006 Bonus Plan to certain employees, including the named executive officers. No right to a minimum bonus exists under the 2006 Bonus Plan.

The Committee derived the corporate performance measures (“performance criteria”) and defined executives’ bonus performance goals (e.g., floor, target and stretch) from the Company’s planned earnings for fiscal 2007, as established by the outside directors. The specific performance criteria adopted for fiscal 2007 bonus determinations under the 2006 Bonus Plan are the greatest of the following measures: (i) income from continuing operations; (ii) income (loss) from continuing operations before extraordinary item and/or cumulative effect of a change in accounting principle (as the case may be); (iii) income before extraordinary items; and (iv) net income, with each such measure being adjusted to remove the effect of the equitable adjustments permitted by the 2006 Bonus Plan. The Company’s performance criteria are established in the discretion of the Committee and the outside directors.

Executives’ bonus performance goals are determined as a percentage of salary. The baseline percentage of salary for each named executive officer has been established by his or her respective employment agreement. On March 9, 2007, the Committee recommended, and the outside directors approved, the following fiscal 2007 target performance goals (expressed as a percentage of the named executive officers’ fiscal 2007 salary), with the floor performance goals being one-half of the target and the stretch performance goals being twice the target: Mr. Fishman: 100%; Mr. Cooper: 50%; Mr. Waite: 75%; Mr. Martin: 60%; and Ms. Bachmann: 50%. Except for Mr. Fishman’s performance goals, the fiscal 2007 performance goals for the named executive officers were not modified from the fiscal 2006 performance goals. Also, on March 9, 2007, the outside directors approved an amendment to Mr. Fishman’s employment agreement that increases his target performance goal from 85% to 100% of his salary and increases his stretch performance goal from 170% to 200% of his salary. This summary is qualified in its entirety by reference to the full text of the amendment to Mr. Fishman’s employment agreement which is filed herewith as Exhibit 10.3.

Equity

On March 9, 2007, the outside directors also determined, upon the recommendation of the Committee, the form and size of equity awards to be granted to the Company’s executives, including the named executive officers, pursuant to the 2005 Incentive Plan. While the form and size of the awards was established on March 9, 2007, the outside directors directed that these awards not be granted until March 13, 2007. This delayed date was established in order to allow the market to absorb and react to the Company’s release of material nonpublic information, and in order to avoid even the appearance that any employees, the Committee or the Board manipulated the terms of the equity awards.

The non-qualified stock option awards are evidenced by the Big Lots 2005 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement. The restricted stock awards are evidenced by the Big Lots 2005 Long-Term Incentive Plan Restricted Stock Award Agreement, the form of which is filed herewith as Exhibit 10.7.

The following table sets forth the equity awards granted to each of the named executive officers on March 13, 2007.

Name	Common Shares Underlying Stock Option Award		Common Shares Underlying Restricted Stock Award
Mr. Fishman		250,000		125,000
Mr. Cooper		37,500		12,500
Mr. Waite		37,500		12,500
Mr. Martin		30,000		10,000
Ms. Bachmann		37,500		12,500

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

Exhibits marked with an asterisk (*) are filed herewith. Exhibits 10.1 through 10.7 are management contracts or compensatory plans or arrangements.

Exhibit No.	Description
10.1	Employment Agreement with Steven S. Fishman (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated June 6, 2005).
10.2	First Amendment to Employment Agreement with Steven S. Fishman (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated February 21, 2006).
10.3*	Second Amendment to Employment Agreement with Steven S. Fishman.
10.4	Big Lots 2006 Bonus Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated May 25, 2006).
10.5	Big Lots 2005 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated May 17, 2005).
10.6	Form of Big Lots 2005 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated February 21, 2006).
10.7*	Form of Big Lots 2005 Long-Term Incentive Plan Restricted Stock Award Agreement.
99.1*	Big Lots, Inc. press release dated March 9, 2007.
99.2*	Transcript of Big Lots, Inc. conference call/webcast dated March 9, 2007.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BIG LOTS, INC.
Dated: March 15, 2007	By:	/s/ Charles W. Haubiel II
		Charles W. Haubiel II
		Senior Vice President, General Counsel and Corporate Secretary

EX-10.3

Exhibit 10.3

SECOND AMENDMENT TO

EMPLOYMENT AGREEMENT

BY AND AMONG

BIG LOTS, INC.,

BIG LOTS STORES, INC.

AND

STEVEN S. FISHMAN

This second amendment (“Amendment”) to the employment agreement by and among Big Lots, Inc. (“BLI”), Big Lots Stores, Inc. (“Big Lots”) and their affiliates, predecessor, successor, subsidiaries and other related companies (collectively the “Company”) and Steven S. Fishman (“Executive”), collectively, the “Parties,” dated July 6, 2005, as previously amended by the first amendment to the employment agreement effective February 21, 2006 (collectively, the “Agreement”), is effective as of the date below (“Effective Date”). Capitalized terms used herein but not otherwise defined in this Amendment shall have the meanings set forth in the Agreement.

1.00   Section 3.02.     The fourth sentence of Section 3.02 of the Agreement is amended by deleting it in its entirety and replacing it with the following:

The Executive’s Bonus Payout percentage will consist of a Target Bonus of 100 percent of Base Salary and a Stretch Bonus of 200 percent of Base Salary.

2.00   The Agreement.Except as otherwise provided herein, all provisions of the Agreement are and shall remain in full force and effect and are hereby ratified and confirmed in all respects, and the execution, delivery and effectiveness of this Amendment shall not operate as a waiver or amendment of any provision of the Agreement not specifically amended herein. All references to the Agreement shall be deemed to include this Amendment.

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Amendment as of March 9, 2007.

BIG LOTS, INC.	STEVEN S. FISHMAN
By: /s/ Brad A. Waite	/s/ Steven S. Fishman
BIG LOTS STORES, INC.
By: /s/ Charles W. Haubiel II

EX-10.7

Exhibit 10.7

BIG LOTS 2005 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

Grantee:

Grant Date:

Restricted Stock¹

In accordance with the terms of the Big Lots 2005 Long-Term Incentive Plan, as may be amended (“Plan”), this Restricted Stock Award Agreement (“Agreement”) is entered into as of the Grant Date by and between you, the Grantee, and Big Lots, Inc., an Ohio corporation (“Company”), in connection with the Company’s grant of the Restricted Stock to you. The Restricted Stock is subject to the terms and conditions of this Agreement and the Plan.

This Agreement describes the Restricted Stock you have been granted and the conditions that must be met before you may receive the Restricted Stock. To ensure that you fully understand these terms and conditions, you should carefully read the Plan and this Agreement.

Description of the Restricted Stock

The Restricted Stock is the Company’s common shares that you will own after the Restricted Stock vests (i.e., all restrictions lapse) and you comply with the terms of this Agreement and the Plan. However, you will forfeit any rights to the Restricted Stock (i.e., they will not be transferred to you) to the extent you do not comply with the terms of this Agreement and the Plan.

No portion of the Restricted Stock that has not vested may be sold, transferred, assigned, pledged, encumbered or otherwise disposed of by you in any way (including a transfer by operation of law); and any attempt by you to make any such sale, transfer, assignment, pledge, encumbrance or other disposition shall be null and void and of no effect.

Vesting of the Restricted Stock

If (i) you are continuously employed by the Company from the Grant Date, (ii) the First Trigger, as defined in Exhibit A, is met during your continuous employment, and (iii) one of the events described below occurs after the First Trigger is met and during your continuous employment, then your Restricted Stock will vest and will be transferred to you without restriction to the extent and upon the earlier occurrence of the following:

A. If the Second Trigger, as defined in Exhibit A, is met, all of your Restricted Stock will vest on the first trading day² after the Company files its Annual Report on Form 10-K (“Form 10-K”) with the United States Securities and Exchange Commission for the fiscal year in which the Second Trigger was met. Note that the First Trigger and Second Trigger may be met in the same fiscal year.

B. If you die or become disabled, a fraction of your Restricted Stock will vest for each consecutive year of employment that you have completed with the Company, with such service period beginning with the Grant Date. Such fraction shall be the reciprocal of the Outside Date, as defined in Exhibit A (i.e., 1/(Outside Date)). Note that if a portion of your Restricted Stock vests upon your death or disability, the later occurrence of any of other event will not cause the vesting of the remaining Restricted Stock.

¹ Denotes the number of Big Lots, Inc. common shares , par value $0.01 per share, underlying the Restricted Stock Award.

² As determined by the New York Stock Exchange or other national securities exchange or market that regulates Big Lots, Inc. common shares.

C. If events A or B above do not occur before the Outside Date, all of your Restricted Stock will vest on the first day of the Company’s first trading window following the Outside Date.

Subject to the terms of the Plan, if the First Trigger is not met before the Outside Date occurs, this Agreement will expire and all of your rights in the Restricted Stock will be forfeited.

Notwithstanding anything to the contrary, your Restricted Stock shall not vest before the first anniversary of the Grant Date. If the First Trigger is met and either event A or B above is also met before the first anniversary of the Grant Date, your Restricted Stock will vest on the first day of the Company’s trading window first following the first anniversary of the Grant Date.

Your Rights in the Restricted Stock

Until the restrictions and conditions described in this Agreement have been met or this Agreement expires, whichever occurs earlier, your Restricted Stock will be held in escrow. The Company will defer distribution of any dividends that are declared on your Restricted Stock until the Restricted Stock vests. These dividends will be distributed at the same time your Restricted Stock vests or will be forfeited if your Restricted Stock does not vest.

You may vote your Restricted Stock before all the terms and conditions described in this Agreement are met or until this Agreement expires, whichever occurs earlier. This is the case even though your Restricted Stock will not be distributed to you until the Restricted Stock vests.

Subject to the Company’s trading policies and applicable laws and regulations, after you become vested in any portion of your Restricted Stock, you shall be free to deal with and dispose of the vested Restricted Stock, and you may request the Company’s transfer agent to issue a certificate for such vested Restricted Stock in your name and free of any restrictions.

Tax Treatment of the Restricted Stock

You should consult with a tax or financial adviser to ensure you fully understand the tax ramifications of your Restricted Stock.

This brief discussion of the federal tax rules that affect your Restricted Stock is provided as general information (not as personal tax advice) and is based on the Company’s understanding of federal tax laws and regulations in effect as of the Grant Date. Section 13.4 of the Plan further describes the manner in which withholding may occur.

You are not required to pay income taxes on your Restricted Stock on the Grant Date. However, you will be required to pay income taxes (at ordinary income tax rates) when, if and to the extent your Restricted Stock vests. The amount of ordinary income you will recognize is the value of your Restricted Stock when it vests. Also, the Company is required to withhold taxes on this same amount. You may elect to allow the Company to withhold, upon the vesting of your Restricted Stock, from the common shares to be issued pursuant to your vested Restricted Stock a number of common shares with an aggregate Fair Market Value, as defined in the Plan, as of the date the withholding is effected, that would satisfy the required statutory minimum (but no more than such required minimum) with respect to the Company’s tax withholding obligation. If you are at the Grant Date, or subsequently become, subject to the Company’s trading windows, you may only make this election during an open trading window. If you wish to make the withholding election permitted by this paragraph, you must give notice to the Company in the manner then prescribed by the Company.

2

Any appreciation of your Restricted Stock after it vests could be eligible to be taxed at capital gains rates when you sell the common shares. If your Restricted Stock does not vest, your Restricted Stock will expire and no taxes will be due.

Section 83(b) Election

Subject to Section 13.17 of the Plan, you shall have the right to make an election under Section 83(b) of the Internal Revenue Code with respect to your Restricted Stock.

General Terms and Conditions

Nothing contained in this Agreement obligates the Company or a subsidiary to continue to employ you in any capacity whatsoever or prohibits or restricts the Company or a subsidiary from terminating your employment at any time or for any reason whatsoever; and this Agreement does not in any way affect any employment agreement that you may have with the Company.

This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts of laws, of the State of Ohio.

If any provision of this Agreement is adjudged to be unenforceable or invalid, then such unenforceable or invalid provision shall not effect the enforceability or validity of the remaining provisions of this Agreement, and the Company and you agree to replace such unenforceable or invalid provision with an enforceable and valid arrangement which in its economic effect shall be as close as possible to the unenforceable or invalid provision.

You represent and warrant to the Company that you have the full legal power, authority and capacity to enter into this Agreement and to perform your obligations under this Agreement and that this Agreement is a valid and binding obligation, enforceable in accordance with its terms, except that the enforcement of this Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereinafter in effect relating to creditors’ rights generally and to general principles of equity. You also represent and warrant to the Company that you are aware of and agree to be bound by the Company’s trading policies and the applicable laws and regulations relating to the receipt, ownership and transfer of the Company’s securities. The Company represents and warrants to you that it has the full legal power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and that this Agreement is a valid and binding obligation, enforceable in accordance with its terms, except that the enforcement of this Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereinafter in effect relating to creditors’ rights generally and to general principles of equity.

Acceptance

By accepting your Restricted Stock, you agree that your Restricted Stock is granted under and is subject to the terms and conditions described in this Agreement and in the Plan, and you agree to accept as binding, conclusive and final all decisions and interpretations of the Committee upon any questions arising under this Agreement or the Plan.

3

EXHIBIT A

As used in this Agreement, the following terms shall have the meanings set forth below:

Applicable Performance Criteria shall mean the greater of Performance Criteria Item (A) or (B) below; provided, however, that if none of performance criteria (A) or (B) appear on the consolidated statements of operations included in the Form 10-K for the applicable fiscal year, then the greater of Performance Criteria Item (C) or (D), as its appears in the Form 10-K for the applicable fiscal year, shall be the Applicable Performance Criteria.

First Trigger shall mean the Company has earned at least $____ under the Applicable Performance Criteria for any fiscal year during the Restriction Period.

Performance Criteria Item shall mean the greater of performance criteria (A), or (B), or under circumstances described above, the greater of (C) or (D) below, with each of (A) through (D) (as the case may be) adjusted to remove the effect of any Unusual or Non-recurring Event, Transaction, or Accrual Items:

(A) Income (loss) per Common Share - diluted from continuing operations.

(B) Income (loss) per Common Share - diluted from continuing operations before extraordinary item and/or cumulative effect of a change in accounting principle (as the case may be).

If neither (A) nor (B) appear:

(C) Income (loss) per Common Share - diluted.

(D) Income (loss) per Common Share - diluted before extraordinary item and/or cumulative effect of a change in accounting principle (as the case may be).

Outside Date shall mean the ____ anniversary of the date upon which the Restricted Stock Award was granted to the Participant.

Restriction Period shall mean the period commencing on Grant Date and continuing until the Outside Date.

Second Trigger shall mean the Company has earned at least $____ under the Applicable Performance Criteria for any fiscal year during the Restriction Period.

Unusual or Non-recurring Event, Transaction or Accrual Item(s) shall mean:

Any gain or loss as a result of litigation or lawsuit settlement (including class action lawsuits) that is specifically disclosed, reported or otherwise appears in the Company’s periodic filings with the Securities Exchange Commission or the Company’s annual report to shareholders.

4

EX-99.1

PRESS RELEASE

FOR IMMEDIATE RELEASE	Contact: Timothy A. Johnson
	Vice President, Strategic
	Planning and Investor Relations
	614-278-6622

BIG LOTS REPORTS FOURTH QUARTER AND FISCAL YEAR RESULTS FOR 2006

COMPANY PROVIDES INITIAL GUIDANCE FOR 2007

COMPANY COMMUNICATES 3-YEAR OUTLOOK

COMPANY ANNOUNCES $600 MILLION SHARE REPURCHASE PROGRAM

Columbus, Ohio - March 9, 2007 - Big Lots, Inc. (NYSE: BIG) today reported fourth quarter fiscal 2006 net income of $104.3 million, or $0.94 per diluted share, compared to net income of $14.7 million, or $0.13 per diluted share for the same period of fiscal 2005. For the fifty-three week fiscal year ended February 3, 2007, net income was $124.0 million, or $1.11 per diluted share, compared to a net loss of $10.1 million, or $0.09 per diluted share, for the fifty-two week fiscal year in 2005. Results include both the continuing operations of the business and discontinued operations.

Discontinued Operations

As discussed in the Company’s Form 10-K filed with the SEC on April 13, 2006, activity related to KB Toys, a former division of the Company, as well as the operating results and costs associated with 130 stores closed in January 2006 are classified as discontinued operations. For the fourth quarter and fiscal year ended February 3, 2007, net income from discontinued operations totaled $12.7 million and $11.4 million, respectively, compared to a net loss of $23.0 million and $25.8 million, respectively, for the fourth quarter and full year periods of fiscal 2005.

Continuing Operations

For the fourth quarter of fiscal 2006, the income from continuing operations was $91.6 million, or $0.83 per diluted share, compared to income from continuing operations of $37.7 million, or $0.33 per diluted share, for the same period of fiscal 2005. For the fifty-three week fiscal year ended February 3, 2007, income from continuing operations was $112.6 million, or $1.01 per diluted share, compared to income from continuing operations of $15.7 million, or $0.14 per diluted share, for the fifty-two week fiscal year in 2005.

  Shareholder Relations Department 300 Phillipi Road Columbus, Ohio 43228-5311 Phone: (614) 278-6622 Fax: (614) 278-6666 E-mail: aschmidt@biglots.com

FULL YEAR FISCAL 2006 HIGHLIGHTS

· Income from continuing operations of $1.01 per diluted share versus income from continuing operations of $0.14 per diluted share last year

· Comparable store sales increase of 4.6%

· Operating profit expansion of 290 basis points

· Record $351 million of Cash Flow (defined as operating activities less investing activities)

· Record inventory turnover of 3.4

· Completed $150 million Share Repurchase program

Commenting on fiscal year 2006 results, Steve Fishman, Chairman and Chief Executive Officer stated, “We made Big Lots a stronger company in 2006 by staying focused on our WIN strategy and holding our team accountable. Quarter by quarter, our execution improved and the merchandise offering in our stores got better and better. During 2006, we restored consistency in comp sales growth, turned inventory faster, and generated more cash than any other period in the Company’s history. We reinvested in our business and returned cash to our shareholders by spending $150 million to repurchase 9.4 million shares of the Company’s stock. Our organization worked extremely hard over the last 12 months and I firmly believe that the WIN strategy is working and we’re seeing the benefits of our efforts in these results. We are equally as excited about what we learned throughout 2006 which served as the basis for our strategies that have been developed for the next three years.”

FOURTH QUARTER HIGHLIGHTS

· Income from continuing operations of $0.83 per diluted share versus income from continuing operations of $0.33 per diluted share last year

· Comparable store sales increase of 4.9%

· Gross margin rate of 40.5%, up 340 basis points to last year

· Expense rate of 31.6%, an improvement of 100 basis points to last year

· Record Cash Flow and inventory turnover

Fourth Quarter Results

Fourth quarter net sales for the fourteen week fiscal quarter ended February 3, 2007, increased 10.8% to $1,545.4 million, compared to $1,394.9 million for the thirteen week fourth quarter in fiscal 2005. Comparable store sales for stores open at least two years at the beginning of the fiscal year increased 4.9% for the quarter.

Operating profit for the fourth quarter of fiscal 2006 was $137.0 million, or 8.9% of sales, compared to last year’s operating profit of $62.8 million, or 4.5% of sales. The improvement in operating profit performance resulted from the Company’s 4.9% comparable store sales increase, a higher gross margin rate, and the continuation of expense leverage compared to the prior year. The Company’s gross margin rate increased 340 basis points compared to last year principally due to improved merchandising and inventory management throughout the entire year which led to significantly less clearance merchandise compared to the prior year. Expenses as a percent of sales improved by 100 basis points resulting primarily from store and distribution center efficiencies associated with lower inventory levels and improved timing of inventory flow.

  Shareholder Relations Department 300 Phillipi Road Columbus, Ohio 43228-5311 Phone: (614) 278-6622 Fax: (614) 278-6666 E-mail: aschmidt@biglots.com

For the fourth quarter of fiscal 2006, the Company recorded net interest income of $1.9 million, a $3.0 million improvement compared to last year, which was directly attributable to the improved cash generation of the business over the last 12 months.

Inventory and Cash Management

Inventory ended the quarter at $758 million, down 9% or $78 million compared to last year. Lower inventory value resulted from a decline in store count along with an 8% decline in average store inventory levels year over year. For the fourth quarter, the Company achieved record inventory turnover results driven by improving inventory management and timely flow of merchandise along with strength in comparable store sales. Inventory turnover performance combined with improving operating results yielded higher Cash Flow for the fourth quarter compared to last year. Cash Flow for the fourth quarter of fiscal 2006 was $304 million compared to approximately $230 million of Cash Flow during the same period last year. The Company ended the fourth quarter of fiscal 2006 with no debt and total cash and investments of $282 million, an increase of $280 million over the prior year.

Share Repurchase Update

As announced in February of 2006, the Company’s Board of Directors authorized the repurchase of up to $150 million of the Company’s common shares. During the fourth quarter of fiscal 2006, the Company completed its $150 million program by purchasing 702,489 shares at a weighted average cost of $22.78. For fiscal 2006, the Company invested $150 million to repurchase 9,434,610 shares at a weighted average price of $15.90 per share. The shares repurchased represent approximately 8% of the total outstanding shares at the beginning of fiscal 2006.

Discontinued Operations

The Company reported income from discontinued operations of $12.7 million in the fourth quarter of fiscal year 2006 compared to a loss from discontinued operations of $23.0 million in fiscal year 2005. The income from discontinued operations for the fourth quarter of fiscal year 2006 was principally comprised of $13.5 million due to the release of a portion of the Company’s KB Toys business bankruptcy-related indemnification reserves and $0.6 million related to the release of a portion of the remaining lease obligations of the 130 stores closed in the fourth quarter of fiscal year 2005; partially offset by a $1.4 million loss due to the sale of the Pittsfield, Massachusetts distribution center (formerly owned by the KB Toys business). The Company’s loss from discontinued operations in the fourth quarter of fiscal year 2005 included $22.6 million primarily related to exit costs of the 130 stores closed, $1.0 million associated with the write down of the Pittsfield, Massachusetts distribution center to fair value less selling cost, upon classification as held for sale, partially offset by $0.6 million of income for the reversal of liabilities associated with the KB Toys business.

2007 OUTLOOK

· Initial Fiscal 2007 annual guidance for income from continuing operations of $1.18 to $1.23 per share versus income from continuing operations of $1.01 per share last year

· Initial annual Cash Flow guidance of approximately $180 million

· Initial Q1 guidance for income from continuing operations of $0.18 to $0.22 versus income from continuing operations of $0.13 per share last year

  Shareholder Relations Department 300 Phillipi Road Columbus, Ohio 43228-5311 Phone: (614) 278-6622 Fax: (614) 278-6666 E-mail: aschmidt@biglots.com

The Company anticipates fiscal 2007 income from continuing operations of $1.18 to $1.23 per diluted share compared to income from continuing operations of $1.01 per diluted share for fiscal 2006. This guidance for EPS growth in the range of 17% to 22% compared to last year is based on an expected increase in comparable store sales of approximately 3% and continued expense leverage. Expense leverage at the planned 3% comparable store sales increase is expected to be in the range of 50 to 70 basis points. The Company estimates that a comparable store sales increase of approximately 1% is needed to leverage the expense structure of the business. The gross margin rate for fiscal 2007 is expected to be essentially flat to fiscal 2006.

The Company projects its income tax rate to be in the range of 36.0% to 39.0%. Capital expenditures are expected to be approximately $70 to $75 million with depreciation expense estimated to be in the range of $90 to $95 million. The Company estimates this financial performance combined with an inventory turnover of 3.5 times should result in Cash Flow of approximately $180 million.

For the first quarter of fiscal 2007, the Company’s guidance calls for a 4% to 6% comparable store sales increase. Based on this level of sales performance, the Company’s earnings are estimated to be in the range of $0.18 to $0.22 per diluted share, compared to income from continuing operations for the first quarter of fiscal 2006 of $0.13 per diluted share.

LONG RANGE OUTLOOK THROUGH FISCAL 2009

· Target annual EPS growth rate of 20%

· Target operating profit rate of approximately 5.5% by fiscal 2009

· Cumulative capital expenditures of approximately $170 to $190 million

· Cumulative Cash Flow of approximately $550 to $600 million

· $600 million share repurchase program to begin in 2007

During August of 2005, the Company introduced its WIN Strategy (What’s Important Now). The Company indicated at that time that WIN would be comprised of 3 distinctive phases: Discovery, Testing and Learning, and Execution. The Discovery phase (Q3 and Q4 of 2005) included tactical decisions to improve near-term performance along with the development of strategic changes to be implemented or tested during fiscal 2006. Throughout the Testing and Learning phase (fiscal 2006), the Company implemented or tested several merchandising, marketing, and operational strategies to better understand the business’ future potential. With the tactical changes made and the knowledge gained from testing and learning, the Company is entering the Execution phase, focusing on fiscal 2007 through fiscal 2009. The long-term view includes the learnings of the last 18 months and encompasses a complete assessment of all areas of the Company’s operations in order to identify the key growth initiatives and strategic investments needed to improve the long-term fitness of the business. The Execution phase is a strategic and executable roadmap focused on expanding the operating profit rate, driving sustainable EPS growth, and generating significant Cash Flow to reinvest in the business or return to shareholders.

  Shareholder Relations Department 300 Phillipi Road Columbus, Ohio 43228-5311 Phone: (614) 278-6622 Fax: (614) 278-6666 E-mail: aschmidt@biglots.com

Based on the detailed strategies underlying the Execution phase (fiscal 2007 - fiscal 2009), the Company announced a three-year financial outlook based on the following assumptions: 1) an annual comparable store sales increase of approximately 3% with sales approaching $170 per selling square foot; 2) a gross margin rate that is essentially flat to actual 2006 results; and 3) expense leverage in the areas of stores, distribution and transportation, insurance costs, and lower depreciation expense based on disciplined capital allocation. Based on these longer-term assumptions, the Company has estimated that the operating profit rate would be approximately 5.5% by fiscal 2009. This operating profit rate expansion would translate to earnings per share of approximately $1.75 by fiscal 2009, or 20% annual compounded growth over the three year period.

Cash Flow for the next three years is anticipated to be approximately $550 to $600 million. Cash Flow estimates include the operating profit growth mentioned above along with an estimated $170 to $190 million of capital expenditures. Additionally, the Company expects to achieve improvements in payables leverage and expects inventory turnover to reach approximately 3.7 by fiscal 2009.

The Company also announced today its Board of Directors authorized the repurchase of up to $600 million of the Company’s common shares commencing immediately and continuing until exhausted. Based on the current share price and number of shares outstanding, the program would allow the Company to acquire approximately 22% of its outstanding shares. The Company believes that the repurchase plan builds value for shareholders. The size of the repurchase program fits well within the Company’s capital structure and long range view of its Cash Flow potential. The Company said it expects the purchases to be made from time to time in the open market and/or in privately negotiated transactions at the Company's discretion, subject to market conditions and other factors. Common shares acquired through the repurchase program will be available to meet obligations under equity compensation plans and for general corporate purposes.

Conference Call/Webcast

The Company will host a conference call today at 8:00 a.m. Eastern Time to discuss the Company's fourth quarter and fiscal 2006 financial results, its fiscal 2007 financial guidance, and provide commentary on the Company’s three year outlook. The Company invites you to listen to the webcast of the conference call through the Investors section of our website (www.biglots.com).

If you are unable to join the live webcast, an archive of the call will be available through the Investors section of our website (www.biglots.com) beginning two hours after the call ends and will remain available through midnight on Sunday, March 25. A replay of the call will also be available beginning March 9 at 12:00 noon (Eastern Time) through March 25 at midnight by dialing: 1.800.207.7077 (United States and Canada) or 1.913.383.5767 (International or metro-Seattle). The PIN is 5326.

Big Lots is the nation’s largest broadline closeout retailer. The Company currently operates 1,375 BIG LOTS stores in 47 states.Wholesale operations are conducted through BIG LOTSWHOLESALE, CONSOLIDATED INTERNATIONAL, WISCONSIN TOY and with online sales at www.biglotswholesale.com. The Company’s website is located at www.biglots.com.

  Shareholder Relations Department 300 Phillipi Road Columbus, Ohio 43228-5311 Phone: (614) 278-6622 Fax: (614) 278-6666 E-mail: aschmidt@biglots.com

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by that Act. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “target,” “forecast” and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are and will be based upon management’s then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. Although we believe the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect our business, financial condition, results of operations or liquidity.

Forward-looking statements that we make herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including, but not limited to, the cost of goods, our inability to successfully execute strategic initiatives, competitive pressures, economic pressures on our customers and us, the availability of brand name closeout merchandise, trade restrictions, freight costs, the risks discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, and other factors discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This release should be read in conjunction with such filings, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

  Shareholder Relations Department 300 Phillipi Road Columbus, Ohio 43228-5311 Phone: (614) 278-6622 Fax: (614) 278-6666 E-mail: aschmidt@biglots.com

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
	FEBRUARY 3		JANUARY 28
	2007		2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	281,657	$	1,710
Inventories		758,185		836,092
Deferred income taxes		60,292		78,539
Other current assets		48,913		77,413
Total current assets		1,149,047		993,754
Property and equipment - net		505,647		584,083
Deferred income taxes		45,057		18,609
Other assets		20,775		29,051
	$	1,720,526	$	1,625,497
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	193,996	$	169,952
Property, payroll and other taxes		93,706		107,126
Accrued operating expenses		58,815		60,270
Insurance reserves		43,518		46,474
KB lease obligation		12,660		27,205
Accrued salaries and wages		43,515		25,171
Income taxes payable		28,022		325
Total current liabilities		474,232		436,523
Long-term obligations		0		5,500
Deferred rent		37,801		42,288
Insurance reserves		44,238		42,037
Other liabilities		34,552		20,425
Shareholders' equity		1,129,703		1,078,724
	$	1,720,526	$	1,625,497

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
	14 WEEKS ENDED						13 WEEKS ENDED
	FEBRUARY 3						JANUARY 28
	2007			%			2006			%
	(Unaudited)						(Unaudited)
Net sales	$	1,545,354			100.0		$	1,394,902			100.0
Gross margin		625,472			40.5			517,023			37.1
Selling and administrative expenses		461,793			29.9			426,831			30.6
Depreciation expense		26,711			1.7			27,394			2.0
Operating profit		136,968			8.9			62,798			4.5
Interest expense		(191	)		(0.0	)		(1,424	)		(0.1	)
Interest and investment income		2,048			0.1			282			0.0
Income from continuing operations before income taxes		138,825			9.0			61,656			4.4
Income tax expense		47,234			3.1			24,003			1.7
Income from continuing operations		91,591			5.9			37,653			2.7
Income (loss) from discontinued operations, net of tax expense (benefit) of $6,218 and ($14,142), respectively		12,708			0.8			(23,001	)		(1.6	)
Net income (loss)	$	104,299			6.7		$	14,652			1.1
Income (loss) per common share - basic
Continuing operations	$	0.84					$	0.33
Discontinued operations		0.12						(0.20	)
Net income (loss)	$	0.96					$	0.13
Income (loss) per common share - diluted
Continuing operations	$	0.83					$	0.33
Discontinued operations		0.11						(0.20	)
Net income (loss)	$	0.94					$	0.13
Weighted average common shares outstanding
Basic		109,090						113,428
Dilutive effect of share-based awards		1,888						596
Diluted		110,978						114,024

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
	53 WEEKS ENDED						52 WEEKS ENDED
	FEBRUARY 3						JANUARY 28
	2007			%			2006			%
	(Unaudited)
Net sales	$	4,743,048			100.0		$	4,429,905			100.0
Gross margin		1,891,432			39.9			1,731,666			39.1
Selling and administrative expenses		1,622,339			34.2			1,596,136			36.0
Depreciation expense		101,279			2.1			108,657			2.5
Operating profit		167,814			3.5			26,873			0.6
Interest expense		(581	)		(0.0	)		(6,272	)		(0.1	)
Interest and investment income		3,257			0.1			313			0.0
Income from continuing operations before income taxes		170,490			3.6			20,914			0.5
Income tax expense		57,872			1.2			5,189			0.1
Income from continuing operations		112,618			2.4			15,725			0.4
Income (loss) from discontinued operations, net of tax expense (benefit) of $4,445 and ($15,886), respectively		11,427			0.2			(25,813	)		(0.6	)
Net income (loss)	$	124,045			2.6		$	(10,088	)		(0.2	)
Income (loss) per common share - basic
Continuing operations	$	1.02					$	0.14
Discontinued operations		0.10						(0.23	)
Net income (loss)	$	1.12					$	(0.09	)
Income (loss) per common share - diluted
Continuing operations	$	1.01					$	0.14
Discontinued operations		0.10						(0.23	)
Net income (loss)	$	1.11					$	(0.09	)
Weighted average common shares outstanding
Basic		110,336						113,240
Dilutive effect of share-based awards		1,594						437
Diluted		111,930						113,677

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	14 WEEKS ENDED			13 WEEKS ENDED
	February 3, 2007			January 28, 2006
	(Unaudited)			(Unaudited)
Net cash provided by operating activities	$	308,712		$	239,630
Net cash used in investing activities		(5,096	)		(9,498	)
Net cash used in financing activities		(29,485	)		(243,514	)
Increase (decrease) in cash and cash equivalents		274,131			(13,382	)
Cash and cash equivalents:
Beginning of period		7,526			15,092
End of period	$	281,657		$	1,710

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	53 WEEKS ENDED			52 WEEKS ENDED
	February 3, 2007			January 28, 2006
	(Unaudited)
Net cash provided by operating activities	$	381,477		$	212,965
Net cash used in investing activities		(30,421	)		(66,702	)
Net cash used in financing activities		(71,109	)		(147,074	)
Increase (decrease) in cash and cash equivalents		279,947			(811	)
Cash and cash equivalents:
Beginning of period		1,710			2,521
End of period	$	281,657		$	1,710

EX-99.2

FINAL TRANSCRIPT

Thomson StreetEvents^SM

Conference Call Transcript

BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Event Date/Time: Mar. 09. 2007 / 8:00AM ET

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1

FINAL TRANSCRIPT

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

CORPORATE PARTICIPANTS

Tim Johnson

Big Lots, Inc. - VP - Strategic Planning & Investor Relations

Joe Cooper

Big Lots, Inc. - SVP & CFO

Steve Fishman

Big Lots, Inc. - Chairman & CEO

CONFERENCE CALL PARTICIPANTS

David Mann

Johnson Rice - Analyst

Jeff Stein

KeyBanc - Analyst

John Zolidis

Buckingham Research - Analyst

Chris Summers

Greenlight Capital - Analyst

Patrick McKeever

Avondale Partners - Analyst

Arnold Brief

Goldsmith & Harris - Analyst

PRESENTATION

Operator

Ladies and gentlemen, welcome to the Big Lots fourth quarter 2006 teleconference. [OPERATOR INSTRUCTIONS]

At this time I would like to introduce today's first speaker, Vice President of Strategic Planning and Investor Relations, Tim Johnson.

Tim Johnson - Big Lots, Inc. - VP - Strategic Planning & Investor Relations

Thanks, Maria, and thank you everyone for joining us for our fourth quarter conference call. With me here in Columbus today are Steve Fishman, our Chairman and CEO, Joe Cooper, Senior Vice President and Chief Financial Officer, and Chuck Haubiel, Senior Vice President and General Council. 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.

Just to set our agenda for this morning, we want to briefly cover the fourth quarter and how we finished the year and Joe will speak to those results in just a moment. We then want to speak to the future. Over the last 18 months we've made some significant changes, tested some different ideas and learned a great deal about our business and our customer base. We promised you that when we finished 2006 we would be in a position to provide our longer-term outlook and the strategies that would drive the business over the next three years. And that is where we intend to spend the majority of our time today.

As you can see from our earnings release this morning, our results include both continuing and discontinued operations. The discontinued operations activity in the fourth quarter and full fiscal year 2006 results reflects the 130 stores closed in January 2006 as described in our Form 10-K, as well as any changes to our KB reserves.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Specifically, in the fourth quarter of fiscal 2006, we reported income from discontinued operations of $12.7 million compared to a loss from discontinued operations of $23.0 million in fiscal year 2005. The income from discontinued operations for the fourth quarter of fiscal year 2006 was principally comprised of the partial release of KB lease obligation of $8.7 million, net of tax, and the release of KB-related income tax and sales tax indemnification liabilities of $4.7 million, net of tax, partially offset by a loss due to the sale of the Pittsfield, Massachusetts, distribution center formally owned by the KB Toys business, of $1.4 million, net of tax. The Company's loss from discontinued operations in the fourth quarter of fiscal year 2005 included $22.6 million primarily related to exit costs of the 130 stores. Should you have any questions regarding DO, we will be more than happy to take them in Q&A. However, since we do not view the discontinued operations as relevant to the ongoing operations of the business, the balance of our prepared comments today will be based on results related to continuing operations.

With that, I'll turn it over to Joe, who will cover our results from continuing operations.

Joe Cooper - Big Lots, Inc. - SVP & CFO

Good morning, everyone. For the fourth quarter of fiscal 2006, we reported income from continuing operations of $91.6 million or $0.83 per diluted share compared to income from continuing operations of $37.7 million or $0.33 per diluted share a year ago. As a reminder, our fourth quarter and full year fiscal 2006 results include the impact of an extra week in the retail calendar, which we have estimated to be worth $0.05 per diluted share. Our Q4 result of $0.83 per share was ahead of our revised guidance of $0.62 to $0.67 per share and ahead of Street estimates, which had moved up recently to approximately $0.70 per share. The favorability to the high end of our guidance related to: First, our sales dollars were slightly above our estimate and added about $0.01 to earnings. Our gross margin rate of 40.5% exceeded our plan and accounted for about $0.06 of favorability. Next, we picked up about $0.04 to $0.05 to guidance in SG&A. Our SG&A leverage of 100 basis points was 50 basis points better than the high-end of our guidance range, as the business did a wonderful job of holding the line on payroll hours and expenses. Additionally, we picked up another $0.01 to our guidance in interest. Interest income was stronger than expected due to better operating performance, along with inventory levels and payables leverage that were both better than planned. And lastly, our tax rate for Q4 came in lower than expected at 34%, which accounted for the balance of the favorability to our guidance.

Sales for the fourth quarter were $1.55 billion, an increase of 10.8% over the prior year. Comparable store sales increased 4.9% driven by continued strength in the value of the average basket. The basket was driven by our "raise the ring" strategy, which resulted in an increase in average item retail across all merchandise categories.

Our gross margin rate for the fourth quarter of 40.5% was 340 basis points higher than last year's rate of 37.1%. As Steve will touch on in a moment, our merchant and planning teams did a good job turning the goods and controlling inventories all year long. This enabled us to have significantly less clearance activity in Q4 compared to a year ago when the business was in a heavy merchandise liquidation mode. We also benefited from better sell-through in seasonal and toys, which are higher margin categories, partially offset by strong selling in lower margin classifications like electronics and health and beauty care. Additionally, our freight costs in Q4 were lower than a year ago. You may recall that last year in the fourth quarter, Big Lots, along with other retailers, were challenged by high fuel costs and transportation premiums due to capacity issues in the industry. This quarter's SG&A rate of 31.6% was 100 basis points better than last year. Leverage was achieved primarily through store payroll and our distribution centers, as our overall unit inventory levels were down significantly to last year. Additionally, the investments in our planning and allocation systems have enhanced our ability to improve the timing of inventory flow and do a much better job getting the right merchandise in the right stores at the right time. Along with the inventory benefits, the stores did a good job managing payroll dollars and not flexing up, even as comps came in at the high end of our range, and the distribution centers had a record year in terms of productivity. Additionally, we gained some natural leverage in the areas of occupancy and insurance due to the 4.9% comp for the quarter. These efficiencies were partially offset by higher bonus expense and asset impairment costs associated with certain stores opened in 2004 and 2005.

Net interest income was $1.9 million for the quarter, a $3.0 million improvement compared to last year due to the Company's improved operating performance and inventory management.

The effective income tax rate for the quarter of 34% was lower than expected due to the release of certain valuation allowances related to state net operating loss carryforwards.

Turning to the balance sheet, our total inventory ended the quarter at $758 million, down 9% or $78 million compared to last year. Average store inventory declined 8% year over year. For the year, inventory turnover was at an all-time high of 3.4 or 12% higher than 2005.

We ended the fourth quarter with no debt and total cash and investments of $282 million, an increase of $280 million compared to last year. Cash flow, which we define as cash provided by operating activities less cash used in investing activities, was $304 million in the fourth quarter compared to $230 million last year. We exclude financing activities from this calculation in order to report what we consider a more appropriate and comparable cash flow metric, where we exclude share repurchase activity, proceeds from the exercise of stock options, and the proceeds generated by the sale of assets, such as the store in Hollywood, California, during fiscal 2006. For the full year of fiscal 2006, we generated a record $351 million of cash flow, an increase of $205 million compared to last year. This result is above our previous guidance and was directly attributable to a combination of better-than-expected operating income, lower inventory levels at the end of the year, and increased accounts payable leverage.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Capital expenditures were $9.7 million for the fourth quarter, which was similar to last year. For the 2006 fiscal year, CapEx was $35.9 million, down $32.6 million to last year. The decreased level of capital spending related to fewer new store openings, and last year's CapEx included capital related to the completion of the reengineering of our Columbus DC. Depreciation expense for the fourth quarter was $26.7 million. For the 2006 fiscal year, depreciation expense was $101.3 million, down $7.4 million compared to last year.

During the fourth quarter, we opened one new store and closed 29 stores. For the 2006 fiscal year, we opened 11 new stores and closed 37 stores, ending the year with 1,375 stores and total selling square footage of 29.4 million.

During the fourth quarter, we completed our $150 million share repurchase program by purchasing approximately 702,000 shares at a weighted average cost of $22.78. For fiscal 2006, the Company invested $150 million to repurchase 9.4 million shares at a weighted average price of $15.90 per share. The shares repurchased represent approximately 8% of the total outstanding shares at the beginning of fiscal 2006.

Now I'd like to turn it over to Steve to share his thoughts on 2006 and then move on to our discussion around the longer-term outlook.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Thanks, Joe, and good morning, everyone. Across the organization, from merchandising to marketing to our stores and distribution centers, I'm proud of how the team executed the "9 Weeks of Christmas", which really drove the quarter. But what's important to understand was that November and December did not just happen. In fact, the roadmap was developed almost a year ago at this time. Some of the items changed or were added, but the strategy was understood well in advance and the team executed.

From a merchandising perspective, I continue to be encouraged by the broad-based strength in our performance across the major categories, and I'm also pleased with the way that our merchants, planners, and allocators are effectively managing our inventory. I am not going to go through all categories, but I do want to make a couple of comments on categories that were strong in the quarter and will be very relevant to our long-range strategies that I'll cover in a moment. First, Furniture led the Company with comps up in the low double-digits in the fourth quarter. For the year, Furniture comps were up 9%, just missing double-digits, and that was on top of a 14% comp in 2005. Upholstery and the successful launch of the Serta mattress program were the key comp drivers for the quarter. The Hardlines classification was up in the high single-digits, with particular strength in Electronics, which was up about 15% on a comp-store basis. We really went after Electronics in our ads during the quarter and it clearly paid off and drove excitement in our stores. For me, one of the most positive signs came in Seasonal. On our last call, I indicated to you that I really felt that we'd turned the corner in Seasonal after under-performing for a number of quarters. Trim-a-Tree, or Christmas, rebounded and comped up 6% for the quarter. We've reworked the strategy in Seasonal and improved the quality of goods that we're offering in our stores and the customer is responding.

So comps were good in all categories, but maybe the most important callout here that I want to spend a moment on is the progress our merchants have made in terms of inventory management and delivering more floor-ready merchandise. First, I'm pleased with the inventory turnover result of the year at 3.4, which was better than originally anticipated and represents a new high for the business. We finished the fourth quarter extremely clean from an inventory perspective, with no seasonal packaways. Inventory per store was down 8% compared to last year. Considering the "raise the ring" strategy drives higher average item retails, actual units per store were down more than 8%. With inventory levels under control, goods are going directly to the floor where they have a much better chance of selling. Additionally, our merchants are delivering more goods that are preticketed, or in PDQs, and as a result, our stores and distribution center productivity were at record highs in 2006.

Building on the successes in merchandising, our marketing program continues to improve and drive sales. The collaboration between the merchants and the marketing team helped us run the right items at great values during the "9 Weeks of Christmas". The ads were more impactful from a visual perspective, enabled us to focus on "buzz builders" and improved selection of quality and branded goods that merchants were delivering.

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4

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

In addition to our circular performance, one of the marketing elements that we're excited about is the database of customers that we're building through our new internet website. We overhauled and relaunched our new website at www.biglots.com at the end of September, and we've been pleased with the response to date. We've built our customer list, or what we call the "Buzz Club", from about 250,000 subscribers when the site launched to over one million as the fourth quarter came to a close. This is an important marketing tool for the future, and will allow us to cost effectively communicate with our core customer base more frequently. In fact, the last week of January, we ran a successful promotion that was an exclusive offer e-mailed to our "Buzz Club" members.

Bottom line, we made Big Lots a stronger Company in 2006. Quarter by quarter, we improved our execution and surpassed our financial goals. We increased comp store sales, strengthened our balance sheet, and reinvested in our business. Our 2006 EPS of $1.01 per share was higher than any single year since 1997, and we generated more cash than any single year in the Company's history. Our success is more than coincidence. Our organization has worked extremely hard over the last 12 months and I'm very pleased with what we've been able to accomplish in a short period of time. I firmly believe the WIN strategy is working and we're seeing the benefits of our efforts in our results.

But we're still very early in the game and eager to take our business to the next level, which is what I'd like to now shift my comments towards. We promised our shareholders and our associates all along that once we completed 2006 we'd be in a position to communicate an execution strategy or longer term view of the business.

In our press release today, we outlined our financial outlook through 2009. For the next few minutes, I want to give you some color around how we believe we'll be able to deliver this level of EPS growth. As good as 2006 was, we believe that our business can deliver annual compounded EPS growth of 20% through 2009.

Our three-year outlook is an operating profit growth plan creating core growth from within. The future does not hinge on a large number of store openings. In fact, our store count will likely contract in each of the next three years. At Big Lots, we source our real estate like we source our merchandise, always looking for value. It's our opinion that right now real estate is not a value. I want to be very clear here, we're not afraid to open new stores with our cash position. We could open a significant number of stores, but I absolutely will not overpay for real estate. When the market softens and our offers begin to look more appealing to landlords, we'll be ready, but for now we're focused on improving the performance of our existing fleet of stores.

First, before I speak to some of the strategies, I think it's important for me to share some of the latest customer research to get a better understanding who's shopping us and what they're saying. During the holiday season, we surveyed over 2,000 customers and we learned a great deal. Some of the most interesting callouts were: Over 80% of our customers come to our stores without a shopping list or without something specific in mind that they're looking for. This is consistent with the research completed in 2005 and suggests to us that if we're executing across the store, which we did in 2006, we can drive some meaningful comps. Next, price dominates top of mind awareness and customers look to us for value and savings. Almost half of our customers surveyed said their shopping trips last 30 to 60 minutes, which we interpret as they are coming to us to shop the store and for the treasure hunt. This was very interesting; customers said that deals are getting better in Seasonal and Home, so hold that thought for a moment. When asked for one word that describes Big Lots, about 80% of the time, customers used phrases like low prices, value, and fun, which is very interesting, and what did not appear was expensive, or any mention of higher prices or raising prices. This suggests to us that our "raise the ring" strategy has not pushed average item retail too far, but instead, still has opportunity. One of the biggest suggested improvements was higher quality goods, which again, suggests to us that customers are willing to pay more for quality and branded goods and that price point is not an inhibitor.

From a demographic standpoint, the survey respondents were approximately 75% female and 25% male, approximately 75% Caucasian, 10% Hispanic, and 10% African-American.

From an income perspective, our customer's average household income is higher than the national average, so the research suggests that our customer base is more skewed towards Middle America than towards the lower income demographics. This is pretty consistent with our last survey but important for investors to understand because there still may be some who believe that we only have a lower-income customer and that is just not the case.

Once again in Q4, when we look at comp performance by store group based on the average household income level in the surrounding area, our comps were similar across all income stratifications. As you can see on the slide on the screen, regardless of the household income surrounding our stores, comps in Q4 were up 5% and for the year comps were up 4% to 5%.

So just to summarize, our customers are shopping the store for treasures, low prices, and value, and for the fun of it. They're finding value and even better values than a year ago in some of our bigger categories. They're spending what we consider to be a lot of time in our store per trip. Customers are looking for brands and better quality goods, and price point does not seem to be an inhibiting factor provided the value proposition is there.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

With that as a backdrop, let's move on to the long-range outlook and start with sales. How are we going to drive the comps? Key drivers will be in both merchandising and marketing. From a merchandising perspective, clearly "raise the ring" will continue to be a key driver of comps. Closeouts in top brands will continue to be the focus. Higher quality goods and no fear of price points is a key takeaway. To that point, our new Global Sourcing group will be very key to improving the quality of our import business in Seasonal, Furniture and some of the Home and Hardlines businesses. We believe, and customer research supports that we have a category mix and we're not anticipating any significant category exits at this time.

But we do believe that a handful of categories will outperform and we may expand footage to capture some of the upside volume that we're not getting today. Through some industry benchmarking and competitive shopping, we have several different classifications with opportunities to do more business, particularly in Furniture, Domestics, and Electronics. Again, these are not new categories; in fact, I just covered with you that these were our strongest classifications in Q4. The point here is that we're just scratching the surface and we would expect these areas will lead the Company in comps for their foreseeable future. Also, in Seasonal, we refined our strategy in Q4 and customers absolutely noticed. For those of you who have not been in our stores so far in the first quarter of this new year, you will see a different assortment in Lawn and Garden and Summer to start off the year. We believe we are doing a much better job at "BigLotizing" Seasonal. We believe Seasonal will be one of our stronger growth categories in the future with some of the upside opportunity coming in lower margin goods or promotional activity that we had previously not been as aggressive going after.

Marketing will supplement the merchandising initiatives and support our 3% comp. In the near term, we intend to run the same amount of circulars as previous years. Based on testing in 2006, we believe we have an opportunity to generate more sales with less cost by making some changes in distribution methods or drop dates. With the money we save by the ad distribution changes, we're making some changes to our TV campaign. We learned from testing in 2006 that we could lift sales by shifting more dollars towards the better quality or more widely viewed television shows, and finally, in marketing, we will continue to push forward with the "Buzz Club" and be more aggressive in both signing up new members and alerting them of new merchandise and offerings in our stores.

From a gross margin and inventory management perspective, I would tell you that we'll continue to focus on generating gross margin dollars and turning merchandise. Our merchants and planning teams will continue to be bonused and held accountable to gross margin dollars, inventory turn, and "raise the ring". I think we did an effective job in 2006 generating gross margin dollars and stabilizing our gross margin rate at about 40% for the year. While we anticipate getting some benefit from our global sourcing efforts and maybe a slightly lower markdown rate, we will be going after some lower margin businesses in certain classifications in Seasonal, Electronics, and Domestics, just to name a few. So 40% as a rate is probably a good benchmark for the foreseeable future.

From an expense standpoint, we have made significant progress over the last 18 months. The Executive team has strategized the next three years and we expect to continue to generate significant SG&A leverage. Big picture, and this is an important point to take away, we are changing the processes and the way we operate this business. SG&A leverage is not about making arbitrary cuts and telling people to go figure it out. We're changing processes and the culture of this business towards one that is ever-changing and aggressively going after SG&A. I've said this on a number of occasions, but merchandising is really the starting point. Outside of the Company you think of merchandising as the stuff in the store. Inside this Company, merchandising is how much you buy, what you pay for it, is it preticketed, does it come in a PDQ, can I flow it or does it have to come all in in one shot, what's the optimal number of units in a case, which stores can sell how much, when's the right time to flow the goods, should it be featured in an ad and the list goes on. Merchandising is not just buying good items, it's a process and it's a process that Big Lots has been evolving and will continue to evolve over the next three years. As it relates to inventory management and the impact of SG&A on the Company, we believe that we're still very early in the game. So when you think about the leverage that will come from us, it is focused in our largest expense line items.

First, we do not think we fully leverage store payroll. The merchandising efforts to deliver more floor-ready goods and the favorable impact of the "raise the ring" strategies will continue to benefit our store teams. We will be investing in a new POS register system which will help us over time to become more efficient. Based on these inventory efficiencies along with the new technology, we are looking at how we schedule in our stores as well as what's the appropriate staffing model in terms of store management and full-time and part-time hourly associates.

Given the significant amount of progress we've made in merchandising, outbound distribution and transportation expense is the single biggest leverage opportunity that exists over the next three years. We currently have five regional DCs that for the majority of the year are under-utilized from a capacity standpoint. On top of that, we have two separate furniture buildings that ship product to our stores, as well. When the Company was over 1,500 stores, growing the store count each year and turning the goods in the two's, this size of infrastructure was more appropriate. But our business is in a much different place today when you consider that we're at 1,375 stores, with likely fewer stores over the next three years, and with turn expectations that would put us in the high three's in the near future. So big changes are expected over the next three years compared to where we were just 18 months ago.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

When you think about the DCs and leverage, the first thing that comes to mind is productivity or cartons per hour; how quickly are we receiving the goods and shipping them to our stores? Our productivity has increased pretty significantly due to the improvements in DC processes and the favorable impact of the merchandising initiatives around "raise the ring" and better management of inventory flow and timing.

From a productivity and transportation cost standpoint, probably the biggest opportunity is in how we handle furniture. Furniture is different than any other category because of the bulk of the product and how much can be shipped on a trailer. Furniture has always been shipped from different buildings and shipped on different trailers because we did not have the capacity in our regional DCs to handle furniture. This means that currently the majority of our stores receive a closeout truck from a regional DC and then a separate furniture truck from one of our furniture DCs on a different day. This process is not efficient for the stores or the distribution centers. The improvement we have made in managing our inventory and turning our goods faster has created the capacity in our regional DCs. This will allow for more furniture product to be handled through our regional DCs which results in fewer shipments and trailers, more efficient unloading processes, and less payroll hours should be needed at the store level.

We've also recently completed an extensive transportation review which benchmarked all aspects of transportation for the Company. As a result of improved processes, better merchandise planning and allocation systems, timing of deliveries, and improving vendor compliance, we've identified transportation savings. Opportunities to save SG&A exist in the mix of carriers we use, reducing our fleet size and maintenance costs, and building better processes for how we transport furniture. So stores and distribution and transportation will continue to drive the bulk of the expected leverage.

We would anticipate that advertising will leverage slightly over the three-year period by reducing print and distribution for our ad circulars and focusing our incremental investments on television and our internet website.

We expect to get some leverage related to recent changes we have made to our healthcare coverage. As most of you know, healthcare costs and medical inflation have been on the rise for a number of years now. Beginning February 1st, we changed our third-party network administrator, allowing us to offer our associates a better plan with a wider network of providers, while saving the Company money. We believe that this change will offset expected medical cost increases and lower our cost as a percent of sales.

And finally, we've been very diligent with capital over the last 18 months. While we have significant investments planned for over the next three years, CapEx will be less than depreciation. Depreciation expense will decline and create leverage.

On the topic of CapEx, we've estimated that we will spend in the neighborhood of $170 to $190 million over the next three years. About half of that number, or $90 million or so, will go towards maintenance of our stores, distribution centers, and offices. This is very important because I'm aware of the perception that we're not spending capital to maintain our fleet of stores and this is just simply not the case. We commit or plan approximately $30 million a year and sometimes we spend more or sometimes less, but the funds are available to address the needs as they arise. I'm not interested in running a deteriorating fleet of stores, but you need to keep in mind that we will never be a Target or a Nordstrom in terms of store appearance or shopping experience. We are in the closeout business. Customers come to us for value, to save money, and to enjoy a treasure hunt in our stores.

Also in terms of stores, we've allocated approximately $15 to $20 million to open new stores over the next three years...ballpark about 15 stores a year or maybe slightly less in '07. Really beginning in 2006, we slowed the rate of new store openings, and our new store strategy is more market focused and prioritized towards our strongest growth markets in the Northwest, West, and South. Based on the new store results in 2006, this was a good decision, and we're happy with the 11 stores that we opened last year and we're making much better use of our cash. I want to stress here that we're not afraid to open new stores and, quite frankly, we want to open more stores, but we will not overpay for real estate just for the sake of unit growth.

We are announcing today that we've made the decision to move forward to spend $40 to $45 million to roll out a new POS register systems for our stores. We tested the system in a group of 32 stores during the fall season and we're pleased with the results and capabilities that it will provide for our store team.

The balance of the capital estimate, or about $25 to $35 million, is a placeholder and will only be spent if the return justifies it. Right now we think that we may spend some of that money to relay some of our high-volume stores. We will relay approximately 70 stores in 2007 and may or may not do more in 2008 or 2009. We think this project makes sense, but we'll only move forward if we see a big enough bump in sales to justify the cost. We could also use some of this placeholder capital to address any potential system enhancements. Today, our merchandising and warehouse management and financial systems are just fine and give us the information we need to run our business. In some cases, the key systems are over ten years old, and it's possible that they may need to be addressed during this three-year period. However, we are trying to gain a better understanding of the financial benefits or process improvements that would come from replacing our current systems in these areas. The evaluation is just beginning, so more to come on this topic.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Now I'm going to turn it over to Joe to speak to some of the dollars and cents. Joe.

Joe Cooper - Big Lots, Inc. - SVP & CFO

As Steve, just detailed the organization has done a tremendous amount of work during 2006 to develop a longer-term outlook for our business through 2009.

First, we're pleased to announce that our Board of Directors authorized the repurchase of up to $600 million of the Company's common shares. The size of the repurchase program fits well within our capital structure and our view of future cash flow. The plan is a multi-year program, which is based on the current share price, would allow the Company to acquire approximately 22% of the total shares outstanding as of the beginning of fiscal year 2007. The program is expected to begin in 2007 and has an open-ended term.

Now I'm going to provide some specifics on 2007 and then speak more high-level in terms of the three-year model.

Overall, we're planning 2007 earnings to be in the range of $1.18 to$1.23 per diluted share, up from 2006's income from continuing operations of $1.01 per diluted share. Our 2007 EPS guidance reflects an annual increase in the range of 17% to 22% compared to fiscal 2006 and is expected to be driven by the combination of higher sales and expense leverage compared to the prior year.

Our 2007 plan calls for total sales that are approximately flat to reported sales for 2006 as we expect that the planned 3% increase in comparable store sales will be offset by the combination of the 53rd week last year and an overall lower average store count compared to fiscal 2006. During 2007, we anticipate opening approximately 10 to 15 new stores and closing approximately 45 to 50 stores, leading us to end fiscal 2007 with approximately 1,340 stores or 28.5 million selling square feet. The overall decline of approximately 35 stores in fiscal 2007 is expected to occur primarily in the fourth quarter.

Over the last 18 months, we've made tremendous strides in generating efficiencies and lowering the overall expense structure of this business. As we've outlined today, SG&A leverage is expected to continue to drive operating margin expansion in 2007. At our guidance of a 3% comp sales increase, the SG&A rate is estimated to be in the range of 35.6% to 35.8%, or 50 to 70 basis points below last year. Expense leverage is expected to come -- expected to come from: First, lower payroll hours per store and tightly managed controllable expenses at the store level. Next, distribution and transportation as a percent of sales is expected to be down to LY due to higher productivity and the improvements in inventory flow and overall unit inventory levels. Additionally, we would expect our insurance costs to show some improvement. And finally, our depreciation expense is expected to decline in 2007. Based on the progress to date and our plans for this year, we're estimating that the comp leverage point for 2007 is at approximately 1%.

In terms of the gross margin rate, we're expecting the rate for fiscal 2007 to be essentially flat to last year.

Filling out the rest of the P&L for 2007, net interest income is somewhat of a moving target based on the timing and execution of the share repurchase program that we announced today. However, given our cash balance to begin the year of over $280 million, and if you were to assume that the share repurchase program occurred ratably over the next three years, interest income would be approximately $8 to $9 million in 2007. Again, these are assumptions only, and the share repurchase program is likely to vary by quarter and by year for the foreseeable future.

The effective income tax rate is planned to be in the range of 36% to 39%, up from the 2006 rate, when we benefited from NOL valuation adjustments and favorable settlement activity.

For the year, capital expenditures are expected to be in the range of $70 to $75 million. Maintenance capital is estimated at about $30 million and new store capital is estimated at approximately $5 million. Each of these numbers is similar to last year. The longer-term investments that Steve mentioned a moment ago will represent approximately $35 to $40 million in 2007 and will be focused on three key initiatives. First, the POS register system will rollout to approximately 700 stores, resulting in CapEx in the range of $20 to $25 million. Next, we set aside about $10 million to invest in store relays or merchandise fixturing to better feature some of our key growth categories. Specifically on store relays, we experimented with a new type of layout in a group of ten or so stores in 2006 and liked what we saw. We've developed a store format that we believe allows us the opportunity to get more inventory out on the selling floor in some of our higher volume, small square footage stores. Finally, we have planned in the neighborhood of $5 million in the event that upon evaluation, certain IT investments in new systems makes sense for the business. Based on these capital assumptions, depreciation expense is estimated to be $90 to $95 million.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Our planned performance, combined with an inventory turnover of 3.5 times, is estimated to generate cash flow in the $180 million range prior to any share repurchase or option exercise activity.

Moving to the first quarter, comp sales are planned in the 4% to 6% range and are expected to benefit from one additional ad circular compared to last year. Q1 earnings are estimated to be in the range of $0.18 to $0.22 per diluted share, compared to $0.13 per share last year. Operating margin expansion for the quarter will come from SG&A leverage as we expect the gross margin rate to be down slightly to last year given certain lower margin deals that have occurred or will occur during the quarter.

Moving to more of an overview perspective on the three-year outlook, we feel strongly that Big Lots is positioned to grow EPS 20% annually over the next three years. And Steve shared the strategies that have been developed to deliver this kind of growth. As we demonstrated in 2006, we are an operating profit growth story and we believe this is a more focused and healthier approach to drive shareholder value over the next three years.

We communicated the key points to our three-year outlook in this morning's press release. Just to summarize, at an estimated comp of 3% per year, we believe the business has the potential to generate approximately 50 to 70 basis points of leverage per year. The process changes and new ideas that Steve mentioned are being implemented in a very methodical manner so as to provide continuity and not disrupt the momentum in this business. This leverage leads to an operating profit potential of approximately 5.5% by 2009, translating to EPS potential of $1.75 per share by 2009, representing a 20% compounded annual growth rate.

And in terms of other key metrics, we anticipate by 2009, inventory turnover improvement to approximately 3.7, cumulative cash flow is estimated at $550 to $600 million, cumulative capital expenditures of $170 to $190 million, and this operating model with disciplined inventory management and diligent capital allocations translates to an ROA in the low double-digits. Tim.

Tim Johnson - Big Lots, Inc. - VP - Strategic Planning & Investor Relations

Thanks, Joe. And Maria, if you could now open the lines, we'd be happy to take some questions.

 QUESTION AND ANSWER

Operator

[OPERATOR INSTRUCTIONS] The first question comes from the line of David Mann with Johnson Rice.

David Mann - Johnson Rice - Analyst

Yes, good morning, Steve. Congratulations to you and the team on a great year.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Thank you.

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

David Mann - Johnson Rice - Analyst

In terms of some of the merchandise initiatives that you talked about, can you comment a little bit more on some of the tests that you ran last year, because it sounds like you had a lot of things going? And as we look to '07, what percent of the entire mix have you felt like you've made some good improvement and what percentage do you see a lot of other opportunities, based on those tests?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

As far as the tests go, David, we ran probably over 30 tests in different major classifications of the businesses, and I really don't want to elaborate on them because I just don't see the benefit to do that, to be quite honest with you. I don't mean that to sound the wrong way, but there's no advantage of it. One of the things that I really talked about that's become very, very clear is that there's no barrier to entry of price point as long as there's value there, and we're getting that in businesses where we think we can continue to drive a higher ticket in the business.

And particularly that has come, as you've seen, in Electronics. If you follow us, you saw what we did in the fall, particularly in November and December and the excitement that we generated, particularly in the television part of the business in Electronics. I think you're going to continue to see that moving into the spring season. One of the reasons why we continue to be excited about that is because, quite honestly, there's a major transition going on in that industry and it will continue to go on in the next 24 months, at least, moving to flat panel televisions and LCD readouts and all of those kinds of things, which means there's a lot of disruption going on at an industry level. And when there's a lot of disruption, that produces big opportunity for us, quite honestly.

The second piece of the business that we've done a lot of testing on that we've seen that there's really no barrier is particularly in the Home Furnishings and Domestics area, particularly some of that coming in higher volume but not as high margin businesses, particularly in the bedding part of the business, David. Although we can sell a lot of comforters at higher margins, we sell a lot of sheet sets, too, at better quality and you don't make the kind of margins in sheet sets you would overall on an average point-of-view price point.

The third piece is Furniture. The Furniture business has just been, in most classifications, outstanding for us and we continue to drive great value there. Along with the fact that it's not a secret, the Serta program has been an absolute homerun for this Company and for Serta, at the same time. It continues to reinforce to our customer brand names at closeout prices. We absolutely have the greatest value on brand name mattresses that there are, and it's just really escalated the volume in that particular classification compared to the private-label program we had before November when we replaced it, on top of the fact that they're very aggressive from a marketing standpoint. And again we ran a promotion, as you saw in November that was terrific, but we came back in February, last month, and it was quite honestly, the biggest program in mattresses we've ever done in a ten-day period in the Company's history by a significant amount.

So as we continue to test, basically what we're finding out is brand names at great values have no barrier to what price points are, as long as there is terrific recognizable value, and because there are so many great retailers out there selling merchandise at prices, they create that value that we're capable of coming in and showing our customer great savings because of it. There is still, quite honestly, no barrier to closeout deals. There continues to be as much activity, if not more activity than ever before, so we see no resistance to any of it. What was the other part of your question, David?

David Mann - Johnson Rice - Analyst

That was generally it. The second --

Steve Fishman - Big Lots, Inc. - Chairman & CEO

I don't know what that is. Go ahead, David.

David Mann - Johnson Rice - Analyst

In some of that cost efficiencies that you're looking to gain in the distribution side of the business,can you give us a sense on what percentage of your business is now preticketed or on a flow-through process, where that can go? It sounds like you have some excess capacity in the distribution system. Can you just talk about that and what opportunities there might be to reduce that?

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Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Steve Fishman - Big Lots, Inc. - Chairman & CEO

The preticketing piece is upwards of between 45% and 50% of the goods flowing through our DCs right now, which is a significant enhancement to where it was before. I think there's still growth opportunity for us, recognizing the fact, though, we're in the closeout business, and when there are deals made, there are deals made and we take inventory that are great value and they may not be preticketed. So can it go higher than 50%? I really do believe so. Much higher than maybe 60%, I'm not sure about that, but we'll continue to work on it. We don't want to make every decision based upon the fact that it's preticketed.

As far as the warehouses go, we haven't -- other than the fact that we recognize the fact there's a lot of capacity and we should get a lot of efficiencies out of it, we haven't made any financial decisions that you may be working towards. We like our five distribution facilities where they are right now and they're working real well for us and we continue and plan on maintaining them. So there's no financial decisions that we're thinking in the background about that. And frankly, I want to be prepared when the real estate does come to us. It will come to us, I just don't know when it's going to happen, and we'll have the capacity and more than adequate ability to handle more inventory and more leverage.

David Mann - Johnson Rice - Analyst

Great. Thank you.

Operator

[OPERATOR INSTRUCTIONS] The next question comes from the line of Jeff Stein with KeyBanc.

Jeff Stein - KeyBanc - Analyst

Thanks. Steve, couple of questions for you. First of all, I signed up for the Buzz Club, so I am getting your frequent e-mails and they certainly are eye-catching. I'm just curious, what kind of redemption rates are you guys see on the online coupons that you've been offering?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

We've only done it one time, Jeff, and honestly, I don't want to share that information, but when you consider the fact that it went at that particular point to between 800,000 and one million Buzz Club members, we compared it to the fact that when we drop a tab, we drop a tab in the $38 million to $40 million range, so you're talking about an insignificant number of total people, but you're focused very well on a customer who you believe shops you, and, of course, on top of that, the cost associated directly with that is insignificant because we have those customers and the cost is nominal to us. We got an exceptionally high return as a percent to total.

Jeff Stein - KeyBanc - Analyst

Wondering if you know what the demographic of that customer is that's signing up online and if you guys have entertained any thoughts at all of basically opening up the business and offering some products online? In other words offering a transactional website.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Yes, and I don't want to comment. We absolutely do know the demographics. We can even tell you exactly by ZIP code where they're coming from. I can tell you the East Coast responds better than the West Coast. We know we're working on the West Coast. We know we get good response in the South and in the Midwest. We absolutely know the demographics of that customer, which absolutely is right down the middle of the profile that I talked about before of slightly higher than the overall average customer base. As far as the second question, it makes a lot of sense, but it's more complicated than a bread box, and when and if we're ready to have that discussion with you, we will absolutely make you aware of it.

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11

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Jeff Stein - KeyBanc - Analyst

Okay, and then, just real quickly, a couple of housekeeping items. For Joe, Joe, wondering what the delta is in that 36% to 39% tax rate, number one? And two, if you guys have any handle on your transportation contract, which I believe is coming up this spring?

Joe Cooper - Big Lots, Inc. - SVP & CFO

Are you talking about the go-forward rate, Jeff?

Jeff Stein - KeyBanc - Analyst

Yes.

Joe Cooper - Big Lots, Inc. - SVP & CFO

Actually, it's a combination of a couple things. First, FIN 48 that will take effect in the first quarter, we believe could create some volatility in our tax rate just because how the uncertain tax positions are reserved and released. And then also, there's some things we're working through on the work -- WTCs, the tax opportunity credit, that could provide some credits within that or not, and then also, state settlement activity, which we never know until those audits are settled, so you're going to see some movement in the tax rate quarter to quarter in the future. It's not something we're ever going to be able to pin down specifically.

Jeff Stein - KeyBanc - Analyst

And what have you baked into your -- as far as cost increase or decrease for your transportation contract, which is usually negotiated in the spring?

Joe Cooper - Big Lots, Inc. - SVP & CFO

It's very similar to '06. We're not speaking specifically on those charges.

Jeff Stein - KeyBanc - Analyst

Thank you.

Joe Cooper - Big Lots, Inc. - SVP & CFO

To answer your first question, our ocean rates renew in May, so those are not done yet, anyway.

Operator

[OPERATOR INSTRUCTIONS] The next question comes from the line of John Zolidis with Buckingham Research.

John Zolidis - Buckingham Research - Analyst

Hi, good morning, and thanks for the detailed prepared comments. A couple questions. First, just some housekeeping stuff. On the extra week, you said it provided $0.05 to the bottom line. How much was it in sales and how much operating leverage did you get from the extra week?

Tim Johnson - Big Lots, Inc. - VP - Strategic Planning & Investor Relations

John, this is Tim. I think we've mentioned this before. We've mentioned $0.05 per diluted share. We've not broken out the components of it and will not do so at this time.

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12

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

John Zolidis - Buckingham Research - Analyst

Okay, and then the 20% longer-term growth rate in EPS, how much of that is coming from net income and how much of it do you anticipate to be driven by share repurchase?

Joe Cooper - Big Lots, Inc. - SVP & CFO

It's about 15% net income and about 5% from EPS accretion from the share repurchase.

John Zolidis - Buckingham Research - Analyst

Okay. Thanks, and then I guess you talked about why you don't want to open up new stores and you'd prefer to use capital to repurchase stock. Is there a price for the stock above which you'd rather go out there and open up stores or is it really about the rents? I guess in connection with that question, when was the last time that rents actually went down?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

I'm not sure what you're looking for, John. We're not opening new -- we never said we didn't want to open new stores, you said that. We said we want to open new stores. We said we don't believe that the value is there based upon what the price of commercial real estate is at this particular point. Take it for granted that it's above what we're willing to pay for it at this particular point. There are landlords out there who understand fair value in return of having somebody like a Big Lots being in their strip mall or a free-standing location. There are people who want to build free-standing locations or strip malls and make us part of it. It's just a different perspective out there. As retail continues to be difficult, which I do believe that it is for many, many strategies out there and people close down more stores, we believe that there will be more of an opportunity and advantage to us. Right now what we've said is we're going to use our cash flow to return it to our shareholder because we don't have a better way to invest in it. And that's exactly why we've announced the share repurchase program.

John Zolidis - Buckingham Research - Analyst

Okay, and then lastly is a philosophical question on the guidance. You obviously did a fantastic job starting the year with much lower numbers than you really ended up at. Now I imagine you did better than you thought you were going to when you first gave that guidance of $0.38 to $0.43 where you started the year. But looking into '07 and the three-year plan, it looks like that's a much more aggressive approach on guiding the Street. And I guess my question is, why do you want to deviate from what seemed to work so well in FY '06?

Joe Cooper - Big Lots, Inc. - SVP & CFO

John, you're reading too much into strategy and how we guide the Street. We guide Street in what the current model and how we're running, we believe we can deliver. During 2006, our performance accelerated faster than we expected, and we beat guidance. I think you're -- well, that's the only way I can answer that question, and we continue to guide the Street based on where we think the business is and what we can deliver.

John Zolidis - Buckingham Research - Analyst

Okay, great. Thanks a lot. I'll be out looking at the stores and look forward to speaking to you next time.

Operator

The next question comes from the line of Chris Summers with Greenlight Capital.

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13

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Chris Summers - Greenlight Capital - Analyst

Hi, guys. A quick question. What is your end of the year 2007 share count implied in your guidance?

Joe Cooper - Big Lots, Inc. - SVP & CFO

End of year 2007 --

Tim Johnson - Big Lots, Inc. - VP - Strategic Planning & Investor Relations

Your average --

Chris Summers - Greenlight Capital - Analyst

Yes, sorry, the average share count for the year that'll be used for the EPS --

Joe Cooper - Big Lots, Inc. - SVP & CFO

Oh, for '07?

Chris Summers - Greenlight Capital - Analyst

Yes.

Joe Cooper - Big Lots, Inc. - SVP & CFO

About 107 million. Okay, got it. And secondly, you were talking earlier about a 4% to 6% comp sales growth. Was that for the first quarter or was that for the full year?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

We said 3% for the year, we said 4% to 6% for the first quarter.

Chris Summers - Greenlight Capital - Analyst

Got it, okay. Thank you. And then, finally, the point-of-sale register rollout -- what do you guys estimate as an ROI on that investment?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

We're not speaking to that.

Chris Summers - Greenlight Capital - Analyst

Okay. Great. Well, thanks a lot, guys, and congratulations on a great year.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Thank you.

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14

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Operator

The next question comes from the line of David Mann with Johnson Rice.

David Mann - Johnson Rice - Analyst

Yes, thank you, again. Curious if you can talk a little bit more about the average ticket in terms of where it is right now and what is the average unit retail in the stores?

Joe Cooper - Big Lots, Inc. - SVP & CFO

Yes -- we're not providing that level of detail other than giving enough color around that our sales are being driven consistent with where we're focusing our attention and that is basket being driven by average item retail.

David Mann - Johnson Rice - Analyst

Okay. And then, Steve, on -- I think on the last call or before, you talked about looking to drive traffic over time. Can you just talk about within the context of the three-year plan some of the things that you think might work to drive traffic?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

I think we talked about the strategies, David. One of the things that's happening and continues to happen as far as -- if you're talking about traffic, I think one, the internet will help. I think, two, switching the model slightly to the fact that we'll probably be a lot more -- no, that's a bad statement -- we will be more aggressive on what you'd consider to be very visible, high-end televisions. And the next generation campaign that you'll see starting Sunday that'll take us into the spring hopefully is going to help. And the third piece of it that really wasn't discussed in any great detail is we still absolutely do a great job in the Consumable parts of the business, particularly in the Food parts of the business, David, and that generates a lot of activity and a lot of excitement.

We don't talk about individual things that are happening, but a lot of the people who would help enhance the traffic on a day-to-day basis in our stores are talking to us and we are putting programs -- and I don't want it to sound wrong, but like day in and day out traffic, like bread, we have relationships established that are going to be new to some of the parts of the country with Interstate Bakery. We'll have Wonder Bread in our stores, we have Pepperidge Farm that we'll have in our stores that we haven't had before. We continue to comp up in the mid single-digits in all those Consumable parts of our business. And as a percent to total, we've said before Consumables and HBC still run almost 30% of this Company's total, and we're not walking away from any of that. And we see deal after deal after deal continuing to come to us.

One of the things that's happening is the drugstore deal that's in the stores right now, and I specifically won't address who it came from or how, all you have to do is shop our stores. We had it in the third quarter of last year and we have it again in the first quarter of this year, which is part of the reason why we're driving the comps a little bit more aggressively for the first quarter than our overall year comp. And that continues to drive excitement and traffic into our stores. We've become the place to have to come to because there's constantly new and different surprises of great value in our stores, and not just at the higher ticket end, but on the Consumables-type things that people need to pick up day in and day out.

David Mann - Johnson Rice - Analyst

In terms of some of the categories you might not have talked about, over a year ago you got out of frozen food because it was low return.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Yes.

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15

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

David Mann - Johnson Rice - Analyst

Are there some categories that are perhaps either going to be cut back a lot or potentially cut back entirely?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Well, there's nothing we're going to exit, but clearly in the testing process, we found that there are some classifications of goods that we probably won't be as aggressive going after from a square footage standpoint that'll have to probably be downsized slightly because of the expansions if we go into the home businesses. Furniture's not that much of an issue. We have square footage in stores that we're operating in right now that are sufficient. But some of the hard goods businesses that are a little bit more male oriented may see a decline in square footage. And our lower-margin businesses -- and frankly, we can't compete even on a closeout basis or on a value basis with some of the big box retailers or, more importantly, the specialty retailers. Quite honestly, it's interesting that we have a little bit more of a challenge against, let's say, a Home Depot or a Lowe's than we do in offering great value against a Target or Wal-Mart, quite honestly.

David Mann - Johnson Rice - Analyst

Well, great. I keep going in the stores weekly and keep seeing the changes, so look forward to seeing you keep it up.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Thanks a lot.

Operator

The next question comes from the line of Patrick McKeever with Avondale Partners.

Patrick McKeever - Avondale Partners - Analyst

Hi, good morning, everyone.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Morning, Patrick.

Patrick McKeever - Avondale Partners - Analyst

So I'll add my congratulations on a great, very, very impressive year. On the consumer research that you mentioned, Steve, --

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Yes

Patrick McKeever - Avondale Partners - Analyst

-- and you mentioned that your customers really don't have any resistance to price points. And it's inferred that it's not the dollar store customer that many people think about when they think about Big Lots, or that customer is not your customer. My question is, as you talk to your customers, how do you think about your competitors now? Who out there do you think you compete most directly with and did you get any insight in that area? You just mentioned Home Depot and that was kind of an interesting one.

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16

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Steve Fishman - Big Lots, Inc. - Chairman & CEO

No. Well, Patrick, I'll reiterate first and answer your question the same way I've answered it before in the past. I don't think we have a competitor in -- specifically in what we do. We think we dominate in the closeout business. Our customer does tell us if they're dissatisfied with our offerings in specifically something that they're looking for, who they do shop, and it varies by classification of goods. It's fairly obvious in traditional and more of the Consumable areas that if we can't fulfill their needs, they're probably going to a Wal-Mart or they're going to a Target.

Interestingly enough, in the Home Furnishings area or the Seasonal areas or Electronics, it's not the mass market, it's the specialty market. And in each business it's exactly who you think it is. If we can't satisfy them in Electronics, they go to one of the big Electronics specialists. If we can't satisfy them for some reason in Home Furnishings, it's not really Wal-Mart or Target, it's one of the bigger box specialty retailers. I'm not trying to advertise for anybody on here, but you know who all these people are. If it's not Seasonal for one reason or another, it's one of the better bigger box people who do Seasonal quite well, so I guess the answer to your questions is, it depends on the classification of goods. Some of it I think is skewed to our offerings and I think as we develop over time, it'll become a better customer and a better customer.

Patrick McKeever - Avondale Partners - Analyst

And then along the same lines, how about -- what did your customers tell you about macro sensitivities? What are the levers or the pressure points, perhaps there? Did they talk about gas prices or was that not a major issue?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

No, not at all.

Patrick McKeever - Avondale Partners - Analyst

Okay. Are there -- so your customer, then, is the middle American shopper?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Absolutely.

Patrick McKeever - Avondale Partners - Analyst

All right. Well, sounds good. I guess I'll leave it at that for now. Thank you so much.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Thank you, Patrick.

Operator

the next question comes from the line of Arnold Brief with Goldsmith & Harris.

Arnold Brief - Goldsmith & Harris - Analyst

Just a couple of quickies. One, could you discuss the "raise the ring" strategy and its success, the degree to which mix -- the change in mix, i.e., furniture as an example, have contributed to "raise the ring", the extent to which package size has contributed to "raise the ring", and the extent to which just higher-price, better-quality merchandise has contributed to "raise the ring"?

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17

Final Transcript

 Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Joe Cooper - Big Lots, Inc. - SVP & CFO

That wouldn't be something I'd want to share. We won't break down the exact --

Arnold Brief - Goldsmith & Harris - Analyst

Anecdotally without getting into the numbers?

Joe Cooper - Big Lots, Inc. - SVP & CFO

Well, yes, it's absolutely all of them where the packaging, -- an obvious example is water. Instead of packages of four, we sell it in cases and packages of 15. It's selling plasma TVs now. It's not raising prices on existing merchandise.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

Selling 400-count sheet sets instead of 200-count sheet sets. It's selling a $6 towel instead of just a $3 towel. But we're not walking away from all of those opening price points, so I don't want that misinterpreted either. We still have the need and we still have a customer who wants opening price value. We offer it. We've just shifted the mix of how much we have and it's a lower percentage at the opening price point. By the way, all those values in 15-pack water are every bit as good or better than it was when we offered a four-pack value of water. It's just that a 15-pack of water is $2.50 and a four-pack of water was $0.88 or $0.99.

Joe Cooper - Big Lots, Inc. - SVP & CFO

The better buy.

Arnold Brief - Goldsmith & Harris - Analyst

Secondly, I think I did the math right quickly here. On your maintenance capital expenditures, it seems to come to less than $22,000 a store, which seems awfully low. Could you comment at all?

Steve Fishman - Big Lots, Inc. - Chairman & CEO

No.

Tim Johnson - Big Lots, Inc. - VP - Strategic Planning & Investor Relations

Arnold, we don't -- I guess we set out the year with a pool of money that the real estate team and the stores team has available for them to use. It does not mean we touch every single store every year. It means we address the issues and try to be proactive on the maintenance side wherever possible, so we're thinking of it more along the lines of a total pool of money to be spent. And then on top of that, as you may or may not be aware, we did do a significant amount of relaying and remodeling of stores in the '01 through '04 timeframe, so a lot of our stores have been touched recently. We're thinking more of it as money available to spend to address needs, we're not thinking of it as all 1,375 stores get $22,000 per store.

Steve Fishman - Big Lots, Inc. - Chairman & CEO

A store doesn't generally need $22,000 when it needs an overhaul or it needs a new furnace or it needs some new fixtures or new lighting. Usually it's a $50,000 investment or $100,000 investment, depending upon what the need is, and we really don't look at it on an average store basis.

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18

Final Transcript

 Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

Joe Cooper - Big Lots, Inc. - SVP & CFO

It also addresses the five regional DCs and the two furnitures DCs, as well. I think that's important to keep in mind, too.

Arnold Brief - Goldsmith & Harris - Analyst

Okay. And then finally, maybe two questions. One, is in terms of making an investment decision, the new store is influenced by the cost of rent. I'm just wondering, on the other hand, the share repurchase program is now involved in a stock that's selling over 20 times earnings. So in terms of return, I'm just wondering where the price of the stock versus, let's say, your sales per square feet if you get them up high enough, does that shift the rent equation? Does the price of the stock shift the ability or desire to invest in the stock? There seems to be other dynamics involved here in making a decision on new stores and repurchase of stock that would be hard to predict over two or three years, particularly if you were successful on raising the sales per square foot.

Joe Cooper - Big Lots, Inc. - SVP & CFO

We know -- the hurdle rates on our stores, we know where that is and where real estate is attractive. One of the issues is our strong markets in the West and the South have seen significant increases, or escalation in rent rates, which has challenged our ability to hurdle in those areas, we hope, in the near term. So until -- as Steve said, until we can get appropriate returns, we will not be opening stores, particularly in those markets. Regardless of the share price, it's a yes/no decision, and we choose not to open those stores. On the share price, that's another decision where certainly we look at that as we execute a share repurchase and we believe we were diligent in doing that in '06 and we continue to do that.

Arnold Brief - Goldsmith & Harris - Analyst

Okay.

Joe Cooper - Big Lots, Inc. - SVP & CFO

Next question.

Tim Johnson - Big Lots, Inc. - VP - Strategic Planning & Investor Relations

Marie, are -- I guess at this point we'll go ahead and finish the call and thank everybody for their interest and participation this morning. And we look forward to speaking with you after the first quarter.

Operator

Ladies and gentlemen, a replay of this call will be available to you within the hour. You can access the replay by dialing 1-800-207-7077 and entering pin number 5326. Again that phone number is 1-800-207-7077, pin number 5326. Ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect.

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19

Final Transcript

Mar. 09. 2007 / 8:00AM ET, BIG - Q4 2006 Big Lots, Inc. Earnings Conference Call

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20

Q4 2006 Conference Call

March 9, 2007

Forward-Looking Statements,

Safe Harbor Provision

Agenda

Ø

Results for Q4 and FY 2006

Ø

3 Year Strategic Outlook

Ø

Financial Outlook

Fourth Quarter 2006 Results

Balance sheet reflects improvements in inventory management 

Cash flow of $351 million for fiscal 2006 is reflective of improved operations and diligent capital allocation

Capital expenditures totaled $36 million for fiscal 2006

Completed $150 million share repurchase program during Q4

Ø

Q4 activity

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Repurchased 0.7 million shares for $16 million

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Weighted average cost of $22.78 per share

Ø

For the full year, $150 million investment to repurchase 9.4 million shares

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8% of outstanding shares at the beginning of 2006

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Weighted average cost of $15.90 per share

“9 Weeks of Christmas” drove Q4 results

Furniture, Hardlines, and Seasonal were category leaders

Merchants are improving inventory turnover and increasing the amount of floor ready merchandise

Building on merchandise successes, marketing programs are helping drive sales

In addition, we are excited about the progress of our website

* 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

3 Year Outlook

3 Distinct Phases of WIN

Discovery  … second half of 2005

Testing … 2006

Execution … 2007 and beyond

WIN Strategy

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

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

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Approximately half of customers spend between 30 and 60 minutes in our store

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Customers said deals are getting better in Seasonal and

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80% of customers use words like Prices, Value, and Fun to describe Big Lots

Ø

Biggest suggestion for improvement was Higher Quality Goods

Key Customer Demographics

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75% Female, 25% Male

Ø

75% Caucasian, 10% Hispanic, 10% African American

Ø

Customer household income is more towards middle income than national average

Household income demographics suggest our core customer is closer to middle income than national averages

Recent results suggest our merchandising strategies have been successful in each income demographic

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 anticipated

Key growth opportunities will be pursued

Furniture

Ø

Hardlines … particularly Electronics

Ø

Home … particularly Domestics

Ø

Seasonal

Ø

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 “Buzz Club”

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 3 years

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Opportunities in Global Sourcing

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Partially offset by sales growth plans in some lower margin strategies

Ø

Inventory turnover expected to grow about 3% per year, or in line with comps

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

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Inventory management and increasing turns

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Investments or process changes in stores and DCs

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Diligent capital allocation

Process changes and new initiatives will drive expense leverage in larger expense categories

Ø

Stores

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Distribution and Transportation

Ø

Insurance

Ø

Advertising

Ø

Depreciation

Capital spending estimated in the range of $170 to $190 million over the next 3 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

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Store Relays

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Merchandising initiatives

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Detailed systems review

Financial Outlook

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)

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$500 - $600 million of anticipated cash flow (’07 – ’09)

–

Current $500 million unsecured revolver that expires in 2009

* Results reflect continuing operations and include 53 weeks compared to 52 weeks in fiscal 2007

2007 Annual Guidance

2007 Annual Guidance (continued)

* Results reflect continuing operations only

Q1 2007 Guidance

3 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

3 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%

Q4 2006 Conference Call

March 9, 2007