Major retail chain stock falls on report it may file bankruptcy
According to MSN, The retail landscape in 2023 was marked by significant financial struggles, with several major chains filing for bankruptcy. Notable names such as Rite Aid, Bed Bath & Beyond, Party City, and Tuesday Morning were among those facing financial distress.
Party City managed to emerge from bankruptcy in October 2023, just in time for the Halloween season, allowing it to continue operations. Similarly, Rite Aid is nearing the end of its bankruptcy process after receiving court approval for its reorganization plan.
However, not all retailers were as fortunate. Bed Bath & Beyond and Tuesday Morning were forced to liquidate their stores in 2023. Despite this, Bed Bath & Beyond’s brand and intellectual property were acquired by Overstock.com, which rebranded and now operates the business online under the name Beyond at Bedbathandbeyond.com.
The trend of major retail bankruptcies continued into 2024. Joann, the fabric and crafts store, filed for Chapter 11 bankruptcy in March, followed by teen apparel retailer Rue 21, which filed for bankruptcy and liquidated in May. In April, discount chain 99 Cents Only also filed for Chapter 11 and subsequently liquidated.
In May 2024, mall-based clothing retailer Express filed for Chapter 11 bankruptcy but managed to survive by closing around 95 stores. More recently, Home Depot competitor LL Flooring filed for Chapter 11 bankruptcy on August 11, seeking to sell its assets.
Big Lots Faces Financial Uncertainty
Discount home goods retailer Big Lots (BIG) is now reportedly considering a potential bankruptcy filing after years of declining sales, according to sources familiar with the company’s plans.
To avoid filing for Chapter 11 bankruptcy, Big Lots is actively seeking investors to infuse capital into the company, according to a person familiar with the situation. Earlier this year, the retail chain secured a loan to address its liquidity challenges.
Rumors of a possible bankruptcy filing gained credibility when Big Lots’ board of directors approved one-time cash retention bonuses totaling $5.24 million for four top executives on August 12, as disclosed in a Securities and Exchange Commission Form 8-K. Offering retention bonuses is a common practice for companies preparing to file for bankruptcy.
The retention bonuses included $3.15 million for CEO Bruce K. Thorn, $969,938 for Chief Financial and Administrative Officer Jonathan A. Ramsden, and $561,068 each for Chief Legal and Governance Officer Ronald A. Robins Jr. and Chief Human Relations Officer Michael A. Schlonsky.
When credible rumors of bankruptcy emerge, a company’s stock often plummets, sometimes leading to trading halts. This was the case with WeWork, the coworking space provider, in November 2023. After the Wall Street Journal reported that WeWork was planning to file for Chapter 11 bankruptcy, the company’s stock dropped by 66%, from $2.52 to 82 cents, with a 46% plunge following the report. WeWork filed for Chapter 11 on November 6, 2023.
In the case of Big Lots, trading on the company’s stock has not been halted, but shares fell by approximately 14% in after-hours trading on August 28, dropping to 80 cents after Bloomberg reported that the company was considering bankruptcy. The stock had initially dropped by about 25% in earlier after-hours trading before partially recovering.
