Struggling retailer closes more stores in Chapter 11 bankruptcy
According to The Street, The retail sector has faced significant challenges since the onset of the Covid-19 pandemic, leading many companies into financial distress and bankruptcy. Retailers have contended with store closures, supply chain disruptions, a consumer shift away from brick-and-mortar establishments, and escalating labor costs, all contributing to dwindling revenues.
A notable event in the retail landscape was Rite Aid’s Chapter 11 bankruptcy filing on October 15, 2023. The company aimed to reorganize its operations, reject certain store leases, and close underperforming locations. Initially, Rite Aid planned to shutter 154 stores, but that number increased to over 800 by August. The retailer successfully exited bankruptcy on September 3.
Similarly, LL Flooring, a competitor of Home Depot, filed for Chapter 11 on August 11, seeking to sell its assets. After two sale proposals fell through, the company opted for liquidation and announced the closure of 430 stores. However, on September 5, LL Flooring reversed its decision after reaching an agreement with private equity firm F9 Investments, which committed to purchasing 219 stores and keeping the business operational. Despite this, the company still closed 211 locations.
Discount home goods retailer Big Lots also faced difficulties, filing for Chapter 11 protection on September 9 in the U.S. Bankruptcy Court for the District of Delaware. The company seeks to sell its assets to stalking-horse bidder Nexus Capital Management for $760 million, which includes $2.5 million in cash, debt repayment, and the assumption of liabilities. The court has scheduled an auction for October 18, contingent on multiple bidders, with a hearing to approve the sale set for November 4.
In its bankruptcy petition, Big Lots disclosed assets and liabilities between $1 billion and $10 billion, including $556.1 million in funded debt obligations, comprised of a $433.6 million asset-based lending facility and a $122.5 million term loan. The Columbus, Ohio-based retailer cited several macroeconomic and industry-specific challenges as reasons for its bankruptcy, such as intense competition, disruptions caused by Covid-19, a high-interest rate environment, and an unreliable supply chain that increased operating costs.
Additionally, Big Lots attributed its struggles to elevated inflation, which has negatively impacted customers’ purchasing power. CEO Bruce Thorn acknowledged that the downturned economy had soured consumer sentiment and hurt profits. The company reported a 10.2% drop in sales to $1.01 billion during the first quarter, resulting in a loss of $132.3 million.
As the fourth-largest home goods retailer in the nation, with general operating revenues of $4.7 billion in 2023, Big Lots operated approximately 1,392 stores across 48 states before filing for Chapter 11 protection. On September 11, the company filed for an interim order to approve an initial list of 344 store closures. This list marked just the beginning of Big Lots’ downsizing, as it subsequently filed a list to close an additional 49 locations nationwide on September 20. More store closure filings are anticipated as the bankruptcy proceedings continue.
