Discount retailer Big Lots has recently filed for Chapter 11 bankruptcy protection due to a decline in consumer spending and soft sales. The company, based in Columbus, Ohio, intends to sell its assets and business operations to private equity firm Nexus Capital Management.
Big Lots attributed its financial struggles to high inflation and interest rates impacting consumer spending, particularly in home and seasonal product categories that are crucial for its revenue. Sales at stores open for at least a year have decreased for nine consecutive quarters, according to FactSet.
Despite some recent improvements in performance, Big Lots’ board concluded that selling to Nexus was the best decision following a strategic review. The company has postponed the release of its second-quarter results to later in the week.
During the court-supervised sale process, Big Lots will continue selling goods in stores and online. While some store closures are planned, details on the number of closures and locations affected were not disclosed. By the end of 2023, the chain operated close to 1,400 stores in 48 states.
Big Lots’ President and CEO Bruce Thorn stated that the planned actions will help the company move forward with new owners who support the business financially. Nexus Capital will act as a “stalking horse” bidder in a court-supervised auction, with the sale subject to potentially better offers. If the sale to Nexus goes through, it is expected to be finalized in the fourth quarter.
Neil Saunders, managing director of GlobalData, commented that Big Lots may have lost customers due to increased price comparisons by consumers. He emphasized the need for Big Lots to enhance its competitiveness within the crowded discount retail market to succeed post-bankruptcy.
To support its operations through the sale process, Big Lots has secured commitments for $707.5 million in financing, including $35 million in new financing from some current lenders. Additionally, the company received a notice from the New York Stock Exchange due to its shares’ low average closing price but can appeal the status. In early trading, shares dropped 40% to 30 cents.
