Discount retail chain closes dozens more stores in bankruptcy
According to The Street, The retail sector has faced significant challenges since the Covid-19 pandemic, leading to widespread financial distress and a surge in bankruptcy filings among companies. Retailers have contended with a variety of issues, including store closures, supply chain disruptions, a shift in consumer behavior away from brick-and-mortar malls and shopping centers, and rising labor costs—all of which have contributed to declining revenue.
Major Retailer Bankruptcies
Rite Aid’s Chapter 11 Filing
One of the most significant retail bankruptcies in the past year was Rite Aid’s Chapter 11 filing on October 15, 2023. The pharmacy chain sought to reorganize its business, reject unprofitable store leases, and close underperforming locations. Initially, Rite Aid planned to close 154 stores, but that number expanded to over 800 by August. The company successfully exited bankruptcy on September 3.
LL Flooring’s Liquidation and Sale
Another notable bankruptcy occurred when LL Flooring, a competitor of Home Depot, filed for Chapter 11 on August 11. The company aimed to sell its assets but ultimately decided to liquidate and close 430 stores after two sale proposals fell through. However, LL Flooring reversed its decision on September 5 after reaching an agreement with private equity firm F9 Investments, which purchased 219 stores and agreed to continue operating the business. Despite this, 211 locations were still shuttered.
Big Lots: A Struggling Retailer
The discount home goods retailer Big Lots (BIG) also filed for Chapter 11 protection on September 9 in the U.S. Bankruptcy Court for the District of Delaware. The company is seeking to sell its assets to its stalking-horse bidder, Nexus Capital Management, for a bid of $760 million, which includes $2.5 million in cash, debt repayment, and assumption of liabilities.
The court has scheduled an auction for October 18, contingent on whether multiple bidders submit offers, with a hearing to approve a sale set for November 4. Big Lots listed assets and liabilities between $1 billion and $10 billion in its bankruptcy petition, including $556.1 million in funded debt obligations—comprising a $433.6 million asset-based lending facility and a $122.5 million term loan.
Economic Challenges Cited by Big Lots
In court filings, Big Lots attributed its bankruptcy to several macroeconomic and industry-specific challenges. Factors such as heightened competition, disruptions from Covid-19, a high-interest rate environment, and an unreliable supply chain contributed to increased operating costs. Additionally, the retailer noted that elevated inflation adversely impacted its customers’ purchasing power, leading its core consumers to hesitate on big-ticket discretionary items.
CEO Bruce Thorn acknowledged the company’s struggles in recent quarters, citing a downturn in the economy that soured customer sentiment and hurt profits. Big Lots reported a 10.2% decline in sales, totaling $1.01 billion during the first quarter, alongside a loss of $132.3 million.
As the nation’s fourth-largest home goods retailer, Big Lots generated general operating revenues of $4.7 billion in 2023. The retailer, founded in 1967, operated approximately 1,392 stores in 48 states earlier this year before filing for Chapter 11 protection. On September 11, Big Lots filed an interim order seeking approval for an initial list of 344 store closures nationwide.
Ongoing Downsizing Efforts
The initial list of store closings marks just the beginning of Big Lots’ downsizing efforts. On September 20, the retailer filed a subsequent list seeking to shut down an additional 49 locations. As its bankruptcy case progresses, more lists of store closures are expected as the company attempts to navigate its financial challenges.
