Discount retailer Big Lots has filed for Chapter 11 bankruptcy protection, as it contends with a pullback in consumer spending and soft sales.
The Columbus, Ohio-based company plans to sell its assets and ongoing business operations to private equity firm Nexus Capital Management.
Big Lots, which sells furniture, home decor and other items, said in a statement on Monday that high inflation and interest rates have hurt its business as consumers have pulled back on their home and seasonal product purchases, two categories the chain depends on for a significant part of its revenue.
Sales at stores open at least a year, a key gauge of a retailer’s health, have declined for nine straight quarters, according to FactSet.
Big Lots said that its performance has been improving, but that its board determined during a strategic review that the proposed sale to Nexus was the right move for the business. The company had postponed the release of its second-quarter results to later this week.
The company will continue to sell goods at its stores and on its website during the court-supervised sale process. The chain added that it does plan to close some stores, but didn’t specify how many or what locations would be impacted. At the end of 2023, Big Lots operated nearly 1,400 stores in 48 states.
“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,” Big Lots President and CEO Bruce Thorn said in a statement.
Nexus Capital will serve as a “stalking horse” bidder in a court-supervised auction, with the proposed sale subject to higher offers or other bids that could be considered better. If Nexus winds up as the winning bidder, the deal is anticipated to close in the fourth quarter.
Neil Saunders, managing director of GlobalData, said in an emailed statement that Big Lots seems to have lost some customers at a time when consumers are comparing prices more.
“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. It needs to step up its game if it is to succeed post-bankruptcy,” he said.
Big Lots Inc. has secured commitments for $707.5 million of financing, including $35 million in new financing from some of its current lenders. Once approved by the court, the financing, along with cash from its ongoing operations, is expected to provide sufficient liquidity to support the company while it works to complete the sale.
The chain has also received a notice from the New York Stock Exchange because the average closing price of its shares was below $1 over a consecutive 30 trading-day period. The notice doesn’t mean that Big Lots’ stock will be immediately delisted as the company can appeal. In premarket trading shares slid 40% to 30 cents.
Big Lots, the popular discount retailer, has recently made headlines after filing for Chapter 11 bankruptcy protection. The company announced its plans to sell off a significant portion of its assets to Nexus Capital Management, a private equity firm, in an effort to restructure its operations and emerge from bankruptcy stronger than ever.
The decision to file for Chapter 11 bankruptcy protection was not taken lightly by Big Lots. The company has been facing financial challenges in recent years, including declining sales and increased competition from online retailers. By filing for bankruptcy, Big Lots hopes to reduce its debt load and streamline its operations to better compete in the retail market.
Under the terms of the agreement with Nexus Capital, Big Lots will sell off a number of its underperforming stores and other assets. This move is expected to provide the company with much-needed cash flow to continue operating while it restructures its business. Additionally, Nexus Capital will provide Big Lots with financial support and expertise to help the company navigate through the bankruptcy process and emerge as a stronger, more competitive retailer.
Despite the challenges that Big Lots has faced in recent years, the company remains optimistic about its future. In a statement, CEO Bruce Thorn emphasized that the company is committed to serving its customers and providing them with quality products at affordable prices. He also expressed confidence in the company’s ability to successfully navigate through the bankruptcy process and emerge as a stronger, more resilient retailer.
For customers of Big Lots, the bankruptcy filing is not expected to have a significant impact on their shopping experience. The company plans to continue operating its remaining stores as usual while it works through the restructuring process. Customers can expect to find the same great deals and discounts that they have come to expect from Big Lots, as well as a continued commitment to providing excellent customer service.
Overall, the decision by Big Lots to file for Chapter 11 bankruptcy protection and sell assets to Nexus Capital represents a strategic move to position the company for long-term success. By streamlining its operations and reducing its debt load, Big Lots is taking proactive steps to ensure its continued viability in the competitive retail market. With the support of Nexus Capital, Big Lots is poised to emerge from bankruptcy stronger than ever and continue providing customers with quality products at affordable prices.
