Another major retail chain may soon file Chapter 11 bankruptcy

According to The Street, The retail industry faced significant challenges in 2023, with several big-name companies filing for bankruptcy. Rite Aid, Bed Bath & Beyond, Party City, and Tuesday Morning were among the major chains that experienced financial turmoil.

Party City and Rite Aid Survive, Bed Bath & Beyond and Tuesday Morning Liquidate

Party City successfully emerged from bankruptcy in October 2023, just in time for its peak Halloween season, continuing as a going concern. Rite Aid is also on the verge of exiting bankruptcy after gaining court approval for its reorganization plan.

However, not all companies were as fortunate. Both Bed Bath & Beyond and Tuesday Morning liquidated their stores in 2023. Bed Bath & Beyond’s brand and intellectual property were acquired by Overstock.com, which rebranded the company as Beyond and now operates the business exclusively online at Bedbathandbeyond.com.

Also read: Big retail brand makes a post-bankruptcy comeback

More Retailers File for Bankruptcy in 2024

The financial struggles continued into 2024. Joann, the fabric and crafts store, filed for Chapter 11 bankruptcy in March, and Rue 21, a teen apparel chain, filed for bankruptcy in May before ultimately liquidating. Discount chain 99 Cents Only also filed for Chapter 11 in April and liquidated its stores.

On a more positive note, mall-based clothing retailer Express filed for Chapter 11 in May 2024 but managed to survive after closing about 95 stores. LL Flooring, a competitor to Home Depot, filed for Chapter 11 in August, seeking a sale of its assets.

Big Lots Faces Bankruptcy Rumors

Big Lots, a discount home goods retailer, is reportedly considering filing for Chapter 11 bankruptcy after years of declining sales. The company is actively seeking investors to provide a capital infusion to avoid bankruptcy, having already secured a loan earlier this year to address its liquidity issues.

These bankruptcy rumors appear credible, as the company’s board of directors approved one-time cash retention bonuses totaling $5.24 million for four top executives in August, a common practice for companies on the verge of filing. CEO Bruce K. Thorn received the largest bonus of $3.15 million, while other top executives, including Jonathan A. Ramsden, Ronald A. Robins Jr., and Michael A. Schlonsky, were awarded significant amounts as well.

Also read: Another distressed trucking company files Chapter 11 bankruptcy

Stock Prices React to Bankruptcy Rumors

When credible bankruptcy rumors surface, stock prices often plummet. This was the case with WeWork in November 2023 when the Wall Street Journal reported that the coworking space provider planned to file for Chapter 11. WeWork’s stock dropped by 66%, eventually filing for bankruptcy on November 6, 2023.

In the case of Big Lots, while trading hasn’t been halted, the company’s stock saw a sharp decline. On August 28, shares dropped by 14% in after-hours trading to 80 cents after Bloomberg reported the potential bankruptcy filing, following an earlier 25% drop.