A Big Lots store in Los Angeles, September 7, 2024. Discount home goods retailer Big Lots Inc. filed for Chapter 11 bankruptcy on September 9, 2024, announcing it plans to close nearly 300 stores and continue operations.
Eric Thayer | Bloomberg |
Discount home goods retailer Big lots The company filed for bankruptcy on Monday after high interest rates and a sluggish real estate market slowed demand for cheap furniture and decorative items.
As part of its Chapter 11 bankruptcy filing, Big Lots has agreed to sell its business to private equity firm Nexus Capital Management for about $760 million, including $2.5 million in cash and remaining debts and liabilities, court documents show.
The company, which operates more than 1,300 stores in 48 states, is one of the country's largest closeout retailers and specializes in offering bargain prices on everything for the home. It had revenue of about $4.7 billion in fiscal 2023, but sales have steadily declined after demand for home furnishings dropped during the pandemic.
In a press release and court filings, Big Lots said it would continue to operate as normal but had begun closing nearly 300 stores to repair its balance sheet and cut costs.
“The actions we are taking today will allow us to move forward with new owners who believe in our company and provide financial stability as we optimize our operating footprint, accelerate our performance improvement and deliver on our promise to be the leader in extreme value,” CEO Bruce Thorn said in a press release. “As we go through this process, we remain committed to our goal of offering extreme bargains, enabling easy shopping in our stores and online and providing an outstanding customer experience.”
Evan Glucoft, chief executive of Nexus, said the company was “confident” that Big Lots' “best days are still ahead of it.”
“We are excited about the opportunity to partner with Big Lots and help restore this iconic brand to its status as America’s leading ultra-value retailer,” said Glucoft.
Big Lots has been on the brink of collapse for months after high interest rates and a sluggish housing market dampened consumer demand for new furniture, decor and other home goods. While discount stores typically do well during tough economic times, Big Lots primarily serves low- and middle-income consumers who have cut back on spending on nonessentials more than their wealthier competitors.
“The company has been negatively impacted by recent macroeconomic factors such as high inflation and interest rates that are beyond its control,” Big Lots said in a press release. “The prevailing economic trends have been particularly challenging for Big Lots as its core customers have curtailed spending on household and seasonal products, which represent a significant portion of the company's sales.”
Aside from macroeconomic conditions, Big Lots also operates in a highly competitive environment and struggles to differentiate itself from other discount retailers that offer household goods or specialize in this category, such as Wayfair, Walmart And TJX Cos.' Household goods.
“Big Lots does not always offer good value for money. Many of the items sold there are not top-of-the-range and are not extremely expensive, but equivalent items can often be found much cheaper at other stores, including Walmart,” said Neil Saunders, managing director of GlobalData, in a statement.
“The other problem [is] the assortment is very chaotic and confusing, which is partly due to the way the store is run,” added Saunders. “However, there is far too much choice and nowhere near enough treasures to entice consumers. This leads to an unsatisfactory shopping experience, especially when compared to other players in the discount space, such as off-price retailers.”
As part of the bankruptcy proceedings, Big Lots will hold a court-supervised auction for its business. The business could go to another buyer if that buyer bids higher than Nexus.
The company is working with law firm Davis Polk & Wardwell, investment bank Guggenheim Securities and consulting firm AlixPartners. A&G Real Estate Partners was selected as Big Lots' real estate advisor, while Nexus is represented by law firm Kirkland & Ellis.
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