Big Lots (NYSE:BIG) had a big day.

Through tighter inventory control and an improved selection of merchandise, the broad-line closeout retailer apparently made a turnaround investors can believe in, to the tune of a 16.5% stock price increase on Friday (and a further ascent today).

Income from continuing operations surged more than 600% over the year-ago period as the company closed down underperforming stores and reduced total inventory at remaining stores. By improving the selection of merchandise, Big Lots was not only able to push same-store sales higher by 4.9%, but it significantly increased its inventory turnover from 3.1 times per year to 3.6 times per year. It might not seem like a lot, but that alone freed up more than $117 million in cash for Big Lots. The closeout king also avoided more clearance sales by having better stock on hand for customers to buy. In the fourth quarter alone, that improved gross margins by 340 basis points.

While many companies announce huge strategic initiatives that never seem to go anywhere -- look at Ford's (NYSE:F) "Way Forward" turnaround plan as an example -- Big Lots was actually able to implement and see results from its WIN strategy, or What's Important Now.

What was important was evaluating its real estate holdings. It closed down 174 stores in 2005 and followed that up by closing down an additional 130 in 2006. While that has added to some lingering costs, it now has a more firm base of 1,375 stores. It then looked at operating expenses and cut those by 100 basis points just in the fourth quarter. By slicing the workforce in the home office and closely monitoring store payroll, Big Lots was able to see big year-over-year improvements. The third leg of its strategy was to evaluate the merchandise sold. Along with improving the mix of current products, Big Lots exited the frozen food business.

That last bit is interesting, in that Dollar Tree (NASDAQ:DLTR), another cut-rate discount merchandiser, actually added freezers to its stores last year to enhance its growth prospects. What works for one doesn't necessarily work for the other, though it could spell trouble down the road for one retailer or the other from lost sales or increased costs.

Considering its recent surge in price, the discount I previously figured Big Lots was trading at narrowed somewhat over the weekend. All the discounters like Dollar Tree, Dollar General (NYSE:DG), and Family Dollar (NYSE:FDO) trade at a fraction of a multiple to sales. Big Lots is no different, though it trends toward the higher end of the range. Considering that the broad-line closeout retailer has found its footing with its plan, I think there's still value to be had in the shares.

See the value in further Foolishness:

Dollar Tree is a former Inside Value recommendation. Family Dollar is a Stock Advisor selection. The Motley Fool has a suite of investment services where a no-cost 30-day trial subscription is yours for the asking.

Fool contributor Rich Duprey owns shares of Ford, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.