A Big Lots store in Los Angeles, California, U.S., on Saturday, Sept. 7, 2024. Discount home goods retailer Big Lots Inc. is preparing to file for bankruptcy as early as Sunday and plans to sell its chain of stores through a court-supervised process, people familiar with the matter said.
Eric Thayer | Bloomberg | Getty Images
Cheap store for household goods Large lots filed for bankruptcy on Monday after demand for cheap furniture and decor fell due to high interest rates and a weak housing market.
As part of the filing, Big Lots has agreed to sell its operations to private equity firm Nexus Capital Management for about $760 million, consisting of $2.5 million in cash plus remaining debt and obligations, court documents show.
The company, which operates more than 1,300 stores in 48 states, is one of the nation’s largest closeout retailers, specializing in offering bargain prices on everything home-related. It brought in about $4.7 billion in revenue in fiscal 2023, but sales have been steadily declining as demand for home furnishings weakened due to the pandemic.
Big Lots said in a press release and court documents that it will continue to operate as normal but has begun closing nearly 300 stores to improve its balance sheet and reduce costs.
“The actions we are taking today allow us to move forward with new owners who believe in our business and provide financial stability as we optimize our operating footprint, accelerate our performance improvement, and deliver on our promise to be the leader in extreme value,” CEO Bruce Thorn said in a press release. “As we move through this process, we remain committed to offering extreme bargains, enabling easy shopping in our stores and online, and delivering an outstanding customer experience.”
Evan Glucoft, chief executive officer at Nexus, said the company is “confident” that Big Lots' “best days are yet to come.”
“We are thrilled to partner with Big Lots and restore this iconic brand to its status as America’s leading retailer of ultra-value products,” said Glucoft.
Big Lots has been teetering on the brink for months after high interest rates and a sluggish housing market slowed consumer demand for new furniture, decor and other household items. While discount stores typically thrive during tough economic cycles, Big Lots primarily caters to lower- and middle-income consumers, who have been curbing their discretionary spending at a faster pace than their wealthier counterparts.
“The Company has been negatively impacted 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 discretionary spending in the household and seasonal product categories, which represent a significant portion of the Company's sales.”
In addition to macroeconomic conditions, Big Lots also operates in a highly competitive space and has struggled to differentiate itself from other discounters that offer home goods or specialize in the category, such as Giveaway, Walmart And TJX Cos.'Household goods.
“Big Lots doesn't always deliver value for money. Many of the items it sells aren't high-end or extremely expensive, but similar items can often be found much cheaper at other retailers, including Walmart,” Neil Saunders, managing director of GlobalData, said in a note.
“The other issue [is] “The assortment is very cluttered and confusing, which is partly a function of the way the business operates,” Saunders added. “However, there is far too much choice and not nearly enough treasures to entice consumers. This makes for an unsatisfactory shopping experience, particularly when compared to other players operating in the discount sector, such as off-price retailers.”
As part of the bankruptcy process, Big Lots will hold a court-supervised auction for its business. It could go to another buyer if they make a bid higher than Nexus's offer.
It is working with law firm Davis Polk & Wardwell, investment bank Guggenheim Securities and consulting firm AlixPartners. A&G Real Estate Partners has been retained as real estate advisor to Big Lots, while Nexus is represented by law firm Kirkland & Ellis.
