Discount retailer Big Lots has filed for bankruptcy and agreed to sell its assets to an affiliate of private equity firm Nexus Capital Management, the companies announced Monday.
By Aaron Gregg
and Big Lots said the economic trends have been particularly challenging because its core customers have pulled back on discretionary purchases, especially on home and seasonal products, which make up a significant portion of its revenue. Neil Saunders, a retail analyst and managing director at GlobalData, said bankruptcy was an “inevitable destination” for the chain. The company had 16 consecutive quarters of comparable sales declines.
The Chapter 11 filing and sale “will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value,” Big Lots chief executive Bruce Thorn said in a statement.
The company also disclosed Monday that the New York Stock Exchange suspended trading of its shares. The stock closed Friday just shy of 50 cents, down more than 93 percent since the start of the year.
In the 13-week period ending May, Big Lots reported a net loss of $205 million on $1 billion in net sales. In a court filing, it estimated assets of $3.17 billion and debts totaling $3.09 billion. It recently delayed reporting its second-quarter earnings.
Saunders pointed to two shortfalls that have steered the chain toward bankruptcy: value and assortment.
“Many of the items it sells are not high-end and are not drastically expensive, but equivalents can often be found much cheaper at other stores, including Walmart,” he said. And the inventory is “jumbled and muddled,” with too many options and “not nearly enough treasure for consumers to be enticed by.”
These factors create a lackluster shopping experience, especially in comparison to such off-price competitors as T.J. Maxx, Marshalls and HomeGoods.
Big Lots will soon enter a sale process supervised by the U.S. Bankruptcy Court for the District of Delaware and close an unspecified number of stores. It had 1,392 locations as of May 4, compared with 1,427 the year before, according to a recent Securities and Exchange Commission filing.
An affiliate of Nexus has agreed to buy substantially all of Big Lots’ assets while the retailer restructures its debts. The process, known as a “stalking horse” bid, is subject to better offers and court approval.
Big Lots said it has secured $707.5 million in financing as part of that process. The company could still entertain offers from competing bidders under an auction supervised by the court.
