US discount retail chain Big Lots filed for bankruptcy on Monday as inflation under the Biden-Harris administration continues to weaken consumer spending and drive retailers out of business.
The company filed for Chapter 11 bankruptcy protection after posting consecutive quarterly losses and being forced to close numerous stores since 2022. It operated about 1,300 stores in the U.S. as of May, down from 1,425 at the start of 2023. According to Big Lots also announced it has secured more than $700 million in financing to navigate its bankruptcy and subsequent sale process, with an affiliate of private equity firm Nexus Capital Management expected to acquire the company, according to The Wall Street Journal. (Related article: Bankruptcies rise for the first time in more than 13 years under Biden. Here's why.)
“The actions we are taking today will allow us to move forward with new owners who believe in our business and will bring financial stability,” Chief Executive Bruce Thorne said in a statement Monday. press release.
The Chapter 11 filings follow a wave of bankruptcies in the retail industry, with 21 retailers having filed for bankruptcy as of July 16, the most ever for the same time in any year since the pandemic began in 2020, the WSJ reported. The retail sector lost 11,100 jobs in August. According to Data from the Bureau of Labor Statistics.
Inflation has led consumers to spend more selectively, leading to a rise in bankruptcies and job losses.
“Like many other retailers, we [Big Lots] “Big Lots has been adversely affected by recent macroeconomic factors outside of its control, including high inflation and interest rates,” the company said in a press release. “Current economic trends have been particularly challenging for Big Lots as the company's major customers have curtailed discretionary spending in the home and seasonal goods categories that generate a significant portion of the company's revenue.”
Prices have risen more than 20% since President Joe Biden took office in January 2021, reaching a peak of 9% in June 2022, up from 1.4% at the end of former President Donald Trump's term.
Surging inflation in 2022 caused consumer confidence to plummet, and it has since “remained within the narrow range of the past two years.” According to Dana M. Peterson, Chief Economist at the Conference Board 20.8% Consumers responded that the business environment in August was “good.” According to On to the Consumer Confidence Survey (CCS).
According to the CCS, consumers have grown more nervous about the labor market after job growth in July and August fell short of economists' expectations, with just 32.8% saying jobs were abundant in August, down from 33.4% in July. Optimism about the stock market has also declined following the sharp sell-off in global stock markets in August, with only 46.9% of respondents expecting stock prices to rise over the next 12 months, down from 50.6% in July.
These economic headwinds have also led to an increase in restaurant closures and bankruptcies, with Red Lobster, the world's largest seafood chain, filing for Chapter 11 bankruptcy protection in May and Hooters closing about 40 locations in June.
Big Lots did not immediately respond to a request for comment.
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