On Monday, September 9, the American discount home goods retailer Big Lots filed for bankruptcy protection citing high interest rates and a sluggish real estate market that led to a slowdown in demand for affordable furniture and decor.
Big Lots operates over 1,300 stores in 48 states across the United States and is one of the largest clearance retailers in the country, specializing in selling a variety of home goods at ultra-low prices. The company had a revenue of around $4.7 billion in the 2023 fiscal year, but during the pandemic, the decreased demand for home goods led to a decline in sales.
Prior to this, Big Lots had already been facing difficulties, with the company warning that its survival was “highly questionable.”
According to court records, as part of its Chapter 11 bankruptcy filing, Big Lots has agreed to sell its business to the private equity firm Nexus Capital Management for approximately $760 million, which includes $25 million in cash and the remainder in debts and liabilities.
Big Lots CEO Bruce Thorn stated in a press release, “The actions we are taking today will enable us to move forward with the new owner who believes in our business and provides financial stability, while optimizing our operational footprint, accelerating performance improvement, and fulfilling our commitment to being a value leader.”
The press release and court documents indicate that Big Lots plans to continue operating its business but has started to close nearly 300 stores to repair its balance sheet and reduce costs.
Thorn mentioned that during this process, the company remains dedicated to providing great value deals to help consumers shop easily in-store and online while delivering an excellent customer experience.
Nexus Managing Director Evan Glucoft expressed, “We are excited for the opportunity to work with Big Lots to help this iconic brand reclaim its position as America’s leading value retailer.”
Big Lots attributes its bankruptcy to several economic factors, including high inflation and interest rates, which have caused customers to change their purchasing habits.
Consumers are increasingly seeking value, not necessarily just lower costs, as reported by CNN. This is why dollar stores have been struggling while sales at Walmart and Amazon continue to thrive. Similarly, fast-food chains like McDonald’s have been facing challenges while casual dining chains like Applebee’s are expanding.
Big Lots explains, “Current economic trends pose a particular challenge for Big Lots as core customers have reduced discretionary spending on household and seasonal product categories, which account for a significant portion of the company’s revenue.”
There may be more store closures in the future. While Big Lots did not announce additional closure plans on Monday, they warned that some stores may need to close to ensure the efficient operation of the business and to continue serving customers.
In addition to macroeconomic conditions, Big Lots also faces intense competition within the industry and is striving to differentiate itself from other home goods providers or discount stores focused on that category, such as Wayfair, Walmart, and HomeGoods under TJX Cos.
As part of the bankruptcy process, Big Lots will hold a court-supervised auction. If other buyers bid higher than Nexus, the business may end up in the hands of another buyer.
With customers cutting back on non-essential spending, more well-known retailers are experiencing financial turmoil. Last week, LL Flooring announced that they could not find a buyer and would be closing after over three decades in operation.
(This article referenced reporting from CNBC)