Another discount retailer shuts down, files Chapter 11 bankruptcy
According to The Street, Brick-and-mortar retail stores have faced significant financial distress over the past two years, driven by various economic factors. Common reasons for these challenges include inflationary pressures from rising costs of labor, freight, and goods; lingering effects of the COVID-19 pandemic; increasing interest rates; and a consumer shift away from traditional malls and shopping centers.
Notable Bankruptcies in Retail
In 2023, major retailers such as Rite Aid and Party City filed for Chapter 11 bankruptcy but managed to exit while still operating their stores. However, Bed Bath & Beyond and Tuesday Morning filed for bankruptcy and subsequently closed all their locations last year.
LL Flooring, a home improvement retailer, filed for Chapter 11 bankruptcy on August 11, 2024. The company closed 211 stores but successfully sold 219 stores to F9 Investments, which plans to continue operating the brand as a going concern.
99 Cents Only’s Liquidation
The discount retail sector also faced substantial challenges in 2024, as 99 Cents Only filed for Chapter 11 bankruptcy on April 8, 2024. Later in May 2024, the company transitioned to Chapter 7 bankruptcy to liquidate and close all 371 stores across Arizona, California, Nevada, and Texas.
Big Lots in Bankruptcy
Big Lots, which operated 1,392 stores in 48 states at the start of 2024, filed for Chapter 11 bankruptcy on September 9. The company is seeking to sell its assets to its stalking-horse bidder Nexus Capital Management for a $760 million bid, which includes $2.5 million in cash, debt payoff, and assumption of liabilities.
An auction is scheduled for October 18, pending any competing bids, with a sale hearing proposed for November 4. Big Lots has begun filing notices to close stores, having listed 497 locations slated for closure nationwide.
Channel Control Merchants to Wind Down Operations
Channel Control Merchants, along with 17 affiliates operating 68 Dirt Cheap, Treasure Hunt, and Dirt Cheap Building Supplies stores in eight Southern states, filed for Chapter 11 bankruptcy, announcing plans to wind down their operations.
The Hattiesburg, Mississippi-based retailer attributed its financial distress to various factors, including product issues with foundational supplier Target Corp., a consumer shift away from brick-and-mortar shopping, changing consumer spending habits, onerous lease terms, and the ongoing impacts of COVID-19 store shutdowns. The company also cited increased labor, freight, and goods costs.
Jeff Martin, the debtor’s chief restructuring officer, revealed that the company’s line of credit expired on July 19, 2024, and it was unable to secure additional liquidity. The board determined that without additional funds, operations could only continue until the end of 2024.
Financial Outlook
The bankruptcy petition filed in the U.S. Bankruptcy Court for the District of Delaware indicates that the company listed $100 million to $500 million in assets and liabilities, including about $32 million in unsecured debt. Its largest unsecured creditors include Target Corp., owed $15.6 million, and Amazon.com, owed $5.8 million.
Founded in 1954, Channel Control Merchants was acquired in May 2023 by a group of investors, including Hilco Global and Behrens Investment Group. The company’s retail outlets sell secondary-market merchandise, including excess inventory and customer returns from major retailers, primarily in Mississippi and Louisiana. Additionally, the company distributes products through wholesale channels to other off-price retailers and e-tailers, featuring a diverse range of items, from apparel and electronics to furniture and health products.
