Big Lots, the complex discount store chain that had already issued statements of “substantial doubt” about its ability to continue operating, filed for bankruptcy. The retailer said in its Chapter 11 filing that Nexus Capital Management, a private equity group, will acquire Big Lots shops and business activities “substantially all.” It added that its stores and website would remain open and available for purchases during the process.
“With new owners who believe in our company and bring financial stability, we can execute on our plans to optimize our operational footprint, accelerate performance improvement and live up to our promise to be the leader in extreme value,” Big Lots CEO Bruce Thorn said in a news release.
Big Lots attributed its bankruptcy to economic problems, including rising interest rates and inflation. Because of it, customers have changed their buying habits. They are looking for value, not always at the expense of less money. This explains why sales at Walmart and Amazon have been soaring while those at dollar stores have failed. This also explains why casual eateries such as Applebee’s have risen while McDonald’s has shown strain.
It quoted, “Big Lots’s core customers curbed their discretionary spending on the home and seasonal product categories that represent a significant portion of the company’s revenue. The prevailing economic trends have been particularly challenging for Big Lots.” More could be coming. About 300 of its 1,400 stores are being shuttered nationwide. Big Lots warned on Monday it will “need to close certain locations to ensure that our business operates efficiently and we can continue serving our customers.” No further closures were announced.
The 57-year-old company has secured $707.5 million in new financing to keep it operating and pay suppliers and employees. The Nexus bid was considered the “stalking horse bidder,” which means the deal is expected to be completed later this year unless the company receives a higher bid.
However, with the deadline for sales in such a short window, Sarah Foss, global director of law and restructuring at Debtwire-a website focused on debt- says it’s “unlikely that another bidder will emerge.” “It gives a debtor leverage in negotiations, and allows a company to renegotiate and reject burdensome leases and contracts, which are often a major financial strain on a distressed company in this sector,” Fox News correspondent Foss said, why Big Lots finds Chapter 11 so favourable.
Big Lots is the latest in a growing list of well-known stores to experience financial troubles as consumers cut back on spending money on items not considered essential. LL Flooring, formerly Lumber Liquidators, said last week that the company would close after over three decades of business since it could not find a buyer.
