Big Lots store in Los Angeles, Sept. 7, 2024. Discount home goods retailer Big Lots Inc. filed for Chapter 11 bankruptcy protection on September 9, 2024, indicating that it plans to close nearly 300 stores and continue operating.
Eric Thayer | Bloomberg | Getty Images
Discount home goods retailer Big Lots filed for bankruptcy Monday after high interest rates and a sluggish housing market slowed demand for low-priced furniture and decor.
As part of its Chapter 11 filing, Big Lots agreed to sell its business to private equity firm Nexus Capital Management for approximately $760 million, consisting of $2.5 million in cash plus its remaining debt and liabilities; court records show.
The company, which has more than 1,300 stores in 48 states, is one of the nation’s largest retailers and specializes in offering staple prices on all things home. It brought in about $4.7 billion in revenue in fiscal 2023, but sales have been steadily declining after demand for home furnishings fell since the pandemic.
In a press release and court filings, Big Lots said it will operate as normal but has begun the process of closing nearly 300 stores so it can fix 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 business and provide financial stability while we optimize our operational footprint, accelerate our performance improvement and deliver on our promise to be the leader on the edge.” value,” CEO Bruce Thorn said in a press release. “As we move through this process, we remain committed to offering extreme opportunities, enabling easy shopping in our stores and online, and providing an exceptional customer experience.”
Evan Glucoft, CEO of Nexus, said the company is “confident” that Big Lots’ “best days are ahead”.
“We are thrilled to have the opportunity to partner with Big Lots and help return this iconic brand to its status as America’s premier extreme value retailer,” said Glucoft.
Big Lots has been near the limit for months after high interest rates and a sluggish housing market slowed consumer demand for new furniture, decor and other home supplies. While discount retailers tend to fare well in rough economic cycles, Big Lots primarily appeal to lower- and middle-income consumers, who have cut back on discretionary spending at a higher rate than their more affluent counterparts.
“The company has been adversely affected by recent macroeconomic factors such as high inflation and interest rates that are beyond its control,” Big Lots said in a press release. “Prevailing economic trends have been particularly challenging for Big Lots as its core customers have curtailed their discretionary spending in the household and seasonal product categories that represent a significant portion of the company’s revenue.”
Macro conditions aside, Big Lots also operates in a highly competitive space and has struggled to differentiate itself from other home goods or category-specialist discounters such as Wayfair, Walmart and TJX Cos.“Household items.
“Big Lots is not always good value for money. Many of the products it sells are not high quality and not very expensive, but equivalents can often be found much cheaper at other stores, including Walmart,” Neil Saunders, managing director consultant to GlobalData, said in a note.
“The other thing [is] the variety is very confusing and confusing, which is partly a function of how the business is run,” Saunders added. “However, there is too much choice and not nearly enough treasure to entice consumers. This creates an unsatisfactory shopping experience, especially compared to other players in the discount space, such as off-price retailers.”
As part of the bankruptcy process, Big Lots will conduct a court-supervised auction of its business. It could go to a different buyer if he makes an offer that is higher than Nexus’ offer.
He works with the law firm Davis Polk & Wardwell, the investment bank Guggenheim Securities and the consulting firm AlixPartners. A&G Real Estate Partners has been selected as Big Lots’ real estate advisor, while Nexus will be represented by law firm Kirkland & Ellis.
