Discount retailer Big Lots has filed for Chapter 11 bankruptcy protection after struggling with declining consumer spending and sluggish sales.
The Columbus, Ohio-based company plans to sell its assets and ongoing operations to private equity firm Nexus Capital Management.
Big Lots, which sells furniture, home decor and other products, said in a statement on Monday that it was “high inflation and interest rate The company's business has been hurt as consumers cut back on buying household staples and seasonal products, two items the company relies on for a large portion of its revenue.
Sales at stores open more than a year, a key measure of a retailer's health, have fallen for nine consecutive quarters, according to FactSet.
Big Lots said its performance was improving and, following a strategic review, its board decided that the proposed sale to Nexus was the right move for the business.
The company postponed its second-quarter earnings release until later this week.
The company plans to continue selling products in its stores and on its website during the court-supervised sale process.
The chain added that it plans to close some stores, but did not disclose how many stores would be affected or where they would be located.
As of the end of 2023, Big Lots operated approximately 1,400 stores in 48 states.
“The steps we are taking today allow us to move forward with new owners who believe in our business and provide financial stability while optimizing our footprint, accelerating our performance improvement and delivering on our promise to become an ultra-high value leader,” Big Lots President and CEO Bruce Thorne said in a statement.
Nexus Capital will be the “stalking horse” bidder in a court-supervised auction, with the proposed sale being contingent on the higher bid or any other bid that it believes is better. If Nexus is ultimately the successful bidder, the transaction is expected to close in the fourth quarter.
Neil Saunders, managing director of GlobalData, said in an emailed statement that Big Lots appears to have lost some customers at a time when consumers are increasingly comparing prices.
“Big Lots operates in a very crowded and competitive market where other value players are far superior in offering low prices and attractive bargains. To succeed post-bankruptcy, it will need to increase competition,” he said.
Big Lots has secured $707.5 million in financing commitments, including $35 million in new financing from existing lenders.
If approved by the court, the loan, combined with cash from ongoing operations, is expected to provide sufficient liquidity to support the company while it works to close the sale.
The chain also received a notice from the New York Stock Exchange after its stock's average closing price fell below $1 for 30 consecutive trading days.
The notice does not mean that Big Lots' shares will be immediately delisted, and the company can appeal.
Shares fell 40% to 30 cents in premarket trading.
