Big Lots on the Brink: Economic Instability Threatens Survival

Big Lots may be teetering on the brink of bankruptcy, facing numerous operational and financial hurdles.

At a Glance

Big Lots is considering a potential bankruptcy filing after years of sales declines.
The company is seeking investors to avoid Chapter 11 bankruptcy.
Shares dropped significantly in after-market trading following the news.
Big Lots operates approximately 1,400 stores in the US.
Alixpartners LLP has been advising Big Lots in its turnaround attempts.

Big Lots Considers Bankruptcy

Big Lots, a prominent U.S. discount retailer, is grappling with the prospect of bankruptcy due to steep sales declines. Economic instability and a sharp increase in living costs have stifled consumer spending, critically undermining the company’s financial health.

The retailer’s share prices plummeted in after-market trading upon the announcement of the potential bankruptcy. This downturn emphasizes the impact of reduced consumer spending on the company’s already strained financial status. Despite these challenges, Big Lots remains proactive by seeking investors to prevent a Chapter 11 bankruptcy.

Off-price home goods retailer Big Lots is contemplating a potential bankruptcy filing https://t.co/CrpjB7fgBt

— Bloomberg (@business) August 28, 2024

Efforts to Avoid Bankruptcy

Efforts to stabilize operations include the appointment of Alixpartners LLP for turnaround advice and obtaining a loan earlier this year to address liquidity issues. Despite these measures, the company’s stock has lost over 90% of its value since January. “Big Lots received a loan earlier this year to help it navigate its liquidity crunch and has been seeking additional financing in recent weeks.”

“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,” said Bruce Thorn, the company’s President and CEO.

Big Lots’ financial troubles don’t stop there. The company’s first fiscal quarter results for 2024 were dismal, reporting a 10.2% net sales decrease, largely due to reduced consumer spending. The economic environment, riddled with concerns about inflation, unemployment, and interest rates, continues to dampen consumer confidence and spending habits.

Discount retailer Big Lots mulling bankruptcy filing as sales decline, Bloomberg reports https://t.co/Q4smv1mg0z pic.twitter.com/oL9jmpllZI

— Reuters (@Reuters) August 29, 2024

Store Operations and Closures

Big Lots operates roughly 1,400 stores across the United States, but not all of these are performing well. The company identified 244 underperforming locations and plans to close 35 to 40 stores this year. The overall retail landscape has been harsh for Big Lots, resulting in the shuttering of more stores in comparison to new openings. In 2022, the company closed 62 stores while opening only 56, with plans for 2024 indicating even fewer new store openings.

Compounding its problems, Big Lots saw a $205 million loss in the first quarter and has spent hundreds of millions of dollars since 2022 to sustain operations. This financial turbulence has led to analysts suggesting that significant changes are necessary to stave off bankruptcy.

The pressure on the retail sector, including Big Lots, is immense. Persistently high-interest rates, increased shipping and delivery expenses, and a notable slowdown in home spending are among the array of challenges the company faces.