Big Lots, Inc. BIG confirmed early Monday that it, along with its subsidiaries, has initiated voluntary Chapter 11 bankruptcy filing and has also agreed to see all of its assets and ongoing business operations to an affiliate of investment firm Nexus Capital Management.
What Happened: The confirmation from the Columbus, Ohio-based discount retailer comes close on the heels of a Bloomberg report that said on Saturday that a company is prepping to file for Chapter 11 and sell its assets through a court-supervised process.
The company announced last week it was delaying the release of its second-quarter results until Sept. 12.
The retailer said during and after the process, it will continue to serve customers at their nearest store location or online.
“The actions we are taking today 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,” said Bruce Thorn, President and Chief Executive Officer.
Evan Glucoft, Managing Director of Nexus, said, “We are excited to have the opportunity to partner with Big Lots and help return this iconic brand to its status as America’s leading extreme value retailer. The Big Lots business has incredible potential and we are confident that its greatest days are ahead.”
The transaction is expected to close during the fourth quarter of 2024.
Why It’s Important: The tough macroeconomic climate marked by high inflation and elevated interest rates has made consumers circumspect, leading to store closures and bankruptcies. The August non-farm payrolls report released last week showed that the economy lost 11,100 retail jobs, reflecting the store closures and bankruptcies.
The total number of retail bankruptcy filings in 2024 through July 16 was 21, higher than in the same period of any year since 2020, S&P Global said in a report.
Big Lots said since the pandemic it has taken steps to accelerate its strategic initiatives focused on improving sales and boosting its long-term performance and profitability but found itself in the crosshairs of recent macroeconomic factors such as high inflation and interest rates that are beyond its control.
“The prevailing economic trends have been particularly challenging to Big Lots, as its core customers curbed their discretionary spending on the home and seasonal product categories that represent a significant portion of the Company’s revenue,” it added.
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Q2 Preliminary Results: Big Lot’s Thorn said the company achieved second-quarter underlying comp sales, gross margin, and operating expenses in line with the guidance.
Underlying comps rose sequentially and year-over-year, and gross margins significantly improved, helped by increasing extreme bargain offerings. The company also said the third quarter was off to a good start with a significant sequential improvement in underlying comp sales as well as underlying gross margin expansion, versus last year.
“We expect the positive momentum to continue into the back half of the year,” Thorn said.
The company confirmed it will report full second-quarter results as part of its upcoming 10-Q filing on Sept. 12.
NYSE Non-Compliance Letter: Big Lots confirmed the receipt of a NYSE letter, stating that it was not in compliance with the NYSE Listing Company Manual due to the average closing price of the stock price at less than $1 over a 30-day trading period. The notice does not result in immediate delisting of the shares from the NYSE, it added.
What’s Next: Big Lots said as part of the court-supervised sale process, it will continue to assess its operational footprint. This will likely lead to additional store closures, it said. The discount retailer also said it will continue to evaluate and optimize its distribution center model.
In connection with the court-supervised process, Big Lots said it has secured commitments for $707.5 million of financing, including $35 million in new financing from certain of its current lenders. Upon Court approval, this financing and cash generated from ongoing operations will likely provide sufficient liquidity as the company works to complete the sales process.
Big Lots ended Friday’s session up 9.11% at $0.4968, according to Benzinga Pro data. The stock slumped nearly 40% in the after-hours session.
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