Major Retailer Faces Uncertain Future Amid Ownership Shift and Store Shutdowns

Big Lots, a major discount retailer, files for bankruptcy and plans to sell its assets to an investment firm amidst ongoing financial struggles.

At a Glance

Big Lots has filed for Chapter 11 bankruptcy protection.
The company plans to sell its assets to Nexus Capital Management.
Approximately 300 of its 1,400 stores will be closed.
High inflation and interest rates have negatively impacted Big Lots’ business.
The company has secured $707.5 million in financing to continue operations.

Big Lots Enters Bankruptcy Proceedings

Big Lots, a well-known discount retailer, has initiated Chapter 11 bankruptcy proceedings, marking a significant turning point for the company. This move comes after a prolonged period of financial difficulties, exacerbated by high inflation and rising interest rates that have negatively impacted the business. The company, which operated nearly 1,400 stores in 48 states at the end of 2023, has experienced nine consecutive quarters of declining sales at stores open for at least a year.

As part of the bankruptcy process, Big Lots plans to sell its assets and business operations to Nexus Capital Management. This strategic decision is aimed at providing financial stability and improving the company’s performance. Nexus Capital will act as a “stalking horse” bidder in a court-supervised auction, with the proposed sale expected to close in the fourth quarter if no higher bids are received.

🚨🇺🇸BIG LOTS SELLS BUSINESS TO NEXUS CAPITAL AMID BANKRUPTCY PROCEEDINGS

U.S. discount retailer Big Lots has filed for Chapter 11 bankruptcy and agreed to sell its business to Nexus Capital for $707.5 million.

Nexus will act as a "stalking horse bidder" in a court-supervised… pic.twitter.com/5wE48UgYoy

— Mario Nawfal (@MarioNawfal) September 9, 2024

Store Closures and Operational Changes

In conjunction with the bankruptcy filing, Big Lots has announced plans to close approximately 300 of its 1,400 stores across the United States. This significant reduction in the company’s retail footprint is part of a broader strategy to optimize operations and address financial shortcomings. While specific locations have not been disclosed, the closures are expected to target underperforming stores.

“Though the majority of our store locations are profitable, we intend to move forward with a more focused footprint to ensure that we operate efficiently and are best positioned to serve our customers,” Big Lots President and CEO Bruce Thorn said in a press release. “To accomplish this, we intend to use the tools afforded by this process to continue optimizing our store fleet in an orderly manner.”

Despite these closures, Big Lots has assured customers that its remaining locations and website will continue to operate during the bankruptcy process. The company has secured $707.5 million in financing, including $35 million from current lenders, to maintain operations and fulfill obligations to vendors and employees.

Financial Challenges and Market Pressures

The bankruptcy filing comes as Big Lots faces mounting financial pressures. The company holds nearly $3.1 billion in debt and $3.18 billion in assets. In the first three months of 2024 alone, Big Lots reported a loss of $132 million. These financial struggles have been reflected in the company’s stock performance, with shares dropping 40% to 30 cents in premarket trading following the bankruptcy announcement.

“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,” Neil Saunders, managing director of GlobalData, said in an emailed statement

The company’s core customers have reduced discretionary spending on home and seasonal products, further impacting sales. Additionally, changing consumer behaviors have posed challenges, with customers seeking value but not necessarily lower costs. These factors, combined with the broader “retail apocalypse” affecting many brick-and-mortar stores, have contributed to Big Lots’ current predicament.

Looking Ahead

As Big Lots navigates through this challenging period, the company’s leadership remains optimistic about its future prospects. CEO Bruce Thorn has stated that the actions taken, including the bankruptcy filing and proposed sale to Nexus Capital, will provide financial stability and help improve performance. The deadline for submitting bids in the court-supervised auction is October 15, which will determine the ultimate ownership of Big Lots’ assets.

“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

As the bankruptcy process unfolds, customers, employees, and investors will be closely watching to see how Big Lots emerges from this restructuring and whether it can successfully reposition itself in the competitive discount retail market.