SHUTTING SHOP: Big Lots retail chain ready to file Chapter 11 bankruptcy
According to The Street, Over the past two years, the retail industry has faced significant challenges, leading several major chains to file for bankruptcy protection, either to reorganize or liquidate entirely.
Failed Bankruptcies: Bed Bath & Beyond and Tuesday Morning
In 2023, home decor retailers Bed Bath & Beyond and Tuesday Morning filed for Chapter 11 bankruptcy but were unable to recover. Despite their efforts, both chains ultimately closed their doors, marking the disappearance of these once-popular brick-and-mortar retailers.
Bankruptcy Filings and Outcomes: Party City and Rite Aid
Party City and Rite Aid, both filed for bankruptcy in 2023. Party City emerged from bankruptcy in October 2023, while Rite Aid exited its restructuring on September 5, 2024, securing a fresh start after a challenging period.
Liquidations: Rue 21, 99 Cents Only, and LL Flooring
Other retailers were not as fortunate. Teen apparel chain Rue 21, discount chain 99 Cents Only, and home improvement retailer LL Flooring filed for Chapter 11 in 2024, leading to the liquidation of their stores.
Mattress Retailers Struggle to Survive
Several mattress retailers were hit hard over the last two years, including Mitchell Gold + Bob Williams and Z Gallerie, which filed for bankruptcy in 2023. In 2024, The RoomPlace, Factory Mattress, Conn’s HomePlus, and Metro Mattress followed suit, all seeking protection through bankruptcy.
Joann and Express: Reorganization and Continued Operation
Joann Fabrics and crafts store, as well as mall-based clothing retailer Express, filed for Chapter 11 bankruptcy in 2024. Both companies closed some of their stores but continued operating after reorganizing as part of their bankruptcy proceedings.
Big Lots Prepares for Chapter 11 Filing
Discount home goods retailer Big Lots is the latest to face financial turmoil, with plans to file for Chapter 11 bankruptcy as soon as September 8, 2024. The company aims to sell all its assets through a Section 363 bankruptcy process, according to Bloomberg. Years of declining sales, paired with inflation that has dampened customers’ purchasing power, have driven the company to this point.
Big Lots’ core customer base has been hesitant to buy big-ticket discretionary items, contributing to the retailer’s poor performance. CEO Bruce Thorn has noted that a weakened economy has further damaged consumer confidence and hurt the company’s profits. In the first quarter of 2024, Big Lots saw a 10.2% drop in sales to $1.01 billion, with a loss of $132.3 million.
“While we made substantial progress on improving our business operations in Q1, we missed our sales goals due largely to a continued pullback in consumer spending by our core customers, particularly in high-ticket discretionary items,” Thorn said.
Stalking-Horse Bid and Store Closures
Big Lots intends to continue operating while seeking a stalking-horse bidder to potentially purchase the company’s assets in a sale or auction. A stalking-horse bid involves a potential buyer making a confidential offer, setting a minimum price for the company’s assets to avoid undervaluation.
As part of its bankruptcy planning, the retailer, which operates about 1,400 stores, announced the closure of 315 underperforming locations in July 2024. Further complicating matters, Big Lots postponed its second-quarter earnings release to September 12.
Executive Retention Bonuses and Stock Decline
On August 12, Big Lots hinted at its impending bankruptcy when the company’s board of directors approved cash retention awards totaling $5.24 million to four top executives. CEO Bruce Thorn received $3.15 million, while three other top executives also received substantial bonuses. Retention bonuses are a common practice prior to bankruptcy filings, intended to keep key leadership in place during turbulent times.
The company’s stock price has seen a dramatic decline, plummeting over 90% in the last year. After-hours trading on September 6 saw the stock fall further, by more than 43%, reaching just 28 cents per share.
