The distressed home sector has taken its toll on another retailer, this time Big Lots Inc., which on Monday filed a Chapter 11 petition for bankruptcy court protection.
The petition was filed in Delaware. As part of its bankruptcy process, Nexus Capital Management has agree to acquire substantially all of the closeout home retailer’s assets and ongoing business operations for $760 million. The agreement sets Nexus in the pole position as the stalking-horse bidder, meaning it will acquire the company unless better offers come in during a court-approved bankruptcy auction that is currently slated for Oct. 18. The transaction is expected to close during the fourth quarter of 2025.
“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,” Evan Glucoft, managing director of Nexus, said in a statement. “The Big Lots business has incredible potential and we are confident that its greatest days are ahead.”
And while Nexus has agreed to keep the operations as a going concern, Big Lots said it continues to assess its store network, which the retailer said will “include closing additional store locations.” The company is slated to close up to 315 of its 1,400 store locations. The stores across the U.S. offer extreme bargains via sourcing strategies through closeouts, liquidations, overstocks, production overruns and value-engineered product offerings. Merchandise categories include soft home goods in apparel, hosiery, fashion bedding and decorative textile products, hard home products in small appliances, home maintenance and organization, and consumables in food, health, beauty, and pets, according to court documents. The discounter also sells furniture items such as upholstery, mattresses, ready-to-assemble items and case goods.
Big Lots said it will continue to evaluate and optimize its distribution center (DC) model. The retailer last week filed a required WARN notice with the City of Columbus, noting that it plans to close a DC at 300 Phillipi Road by Oct. 31. The notice indicated that 379 workers at the DC will receive benefits and pay through Nov. 3.
“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,” Big Lot’s president and CEO Bruce Thorn said in a statement.
Thorn added that as the company works through the Chapter 11 process, Big Lots remains “committed to offering extreme bargains” and enabling easy shopping in its stores and online.
There have been rumblings of a possible bankruptcy filing since June when the retailer in a regulatory filing expressed worries about its going-concern status. The retailer has incurred net losses in 2022, 2023 and in the first quarter of 2024. Those losses put the home discount retailer on the watch list of many credit analysts. The bankruptcy rumblings grew louder last week after Big Lots postponed the release of its second quarter earnings report. Originally slated for Sept. 6, the company now plans to report results on Thursday, a move that suggested dire straits and an imminent bankruptcy filing. On Friday, Telsey Advisory Group retail analyst Joseph Feldman dropped coverage of Big Lots due to limited visibility on business trends and its difficult financial position. At the time, Feldman said the delayed release of second quarter result “does not bode well for a company in financial trouble.”
Jonathan Ramsden, Big Lots’ chief financial and administrative officer, said in a court filing that the retailer between 2013 and 2018 shifted its focus from extreme value to prioritizing the sale of national brands, which in part resulted in diminished customer traffic. A new leadership team in 2018 and 2019 revitalized the focus back to the retailer’s core mission in the bargain sector. He said there was early success in the new strategies, and the COVID-19 pandemic helped as customers focused on investments in their homes. But inflationary and macro-economic pressures “adversely impacted the buying power of Big Lots’ core customers,” he said. That impact resulted in decreased net sales and a decline in gross margin as customers pulled back on high-margin home and seasonal product purchases. In addition, the company saw an increase in selling and administrative expenses.
“During the last two years, the company sold excess high-cost inventory at record markdown rates and upgraded its merchandising team with veterans in the closeout goods space to drive bargain penetration. The company continues to adjust its merchandising and operating models to position itself as the preeminent value-focused retailer,” Ramsden said.
He also noted that the United Furniture Industries Inc. (UFI) shut down of operations in November 2022 impacted Big Lots, since UFI was the retailers largest supplier and primary vendor for its Broyhill furniture brand.
The company hired advisors in May that worked to find a buyer, which resulted in 12 firms signing non-disclosure agreements to obtain confidential information in preparation for a possible bid.
The Chapter 11 petition indicated that the company expects there will be funds available for distribution to unsecured creditors. The estimated number of creditors was listed as between 5,001 and 10,000. Total estimated assets were listed at $3.18 billion and estimate liabilities at $3.1 billion, as of May 4, 2024. In addition to the Big Lots petition, 18 affiliates also filed Chapter 11 petitions, include Broyhill LLC, the home furniture brand that once was part of the bankrupt Heritage Home Group. Authentic Brands Group acquired Heritage’s brands for $38.5 million in October 2018, which included Broyhill, Drexel, Henredon, and Thomasville lines. The Broyhill rights were sold to Big Lots a month later. The company employs 27,700 people.
Big Lots’ Chapter 11 filing follows that of Conn’s in July and LL Flooring, the former Lumber Liquidators, which filed last month. Both Conn’s and LL Flooring said they are shutting down operations.
