Discount retailer Big Lots has filed for Chapter 11 bankruptcy protection as it faces declining sales and challenges posed by high inflation and interest rates.
The Ohio-based company, known for selling furniture, home decor, and seasonal products, is set to sell its assets and business operations to private equity firm Nexus Capital Management.
The bankruptcy comes as Big Lots struggles with a prolonged drop in consumer spending on discretionary items, such as home goods and seasonal products—categories that contribute significantly to its revenue. Sales at stores open for at least a year have decreased for nine consecutive quarters, reflecting the broader challenges facing the company.
Big Lots’ President and CEO, Bruce Thorn, expressed optimism about the company’s future under new ownership, stating that the sale would offer financial stability and allow the retailer to streamline its operations.
“The actions we are taking today will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value,” Thorn said.
Nexus Capital will serve as the “stalking horse” bidder, meaning it has made the initial offer, but other buyers could potentially bid higher in the court-supervised auction. If no higher offers are made, the deal with Nexus is expected to close by the fourth quarter.
As part of the restructuring, Big Lots plans to close an unspecified number of stores, adding to the approximately 300 locations already set to shut down across the US At the end of 2023, Big Lots operated nearly 1,400 stores in 48 states. The company will continue to sell products both in stores and online during the bankruptcy process.
Big Lots has secured $707.5 million in financing, including $35 million in new funds from its existing lenders, to ensure it can continue operations and meet financial obligations during the sale process. This financing, along with revenue from ongoing business operations, is expected to provide the liquidity needed to maintain the company’s workforce and pay vendors.
The company has also received a notice from the New York Stock Exchange due to its stock price falling below $1, raising concerns about a potential delisting. Shares of Big Lots fell 40% to $0.30 in premarket trading following the bankruptcy announcement.
Retail analysts have pointed out that Big Lots has struggled to compete in a highly competitive market, where other discount retailers have been more successful in attracting budget-conscious consumers.
“Big Lots operates in a very crowded and competitive market where other value players do a far better job of delivering on low prices and compelling bargains,” said Neil Saunders, managing director of GlobalData.
He added that the company will need to improve its offerings if it hopes to succeed post-bankruptcy.
With input from CNN, FOX Business, and ABC News.
