A Big Lots store is seen 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, according to people familiar with the plans.
Eric Thayer | Bloomberg | Getty Images
Discount home goods retailer Large lots filed for bankruptcy on Monday after high interest rates and a sluggish housing market slowed demand for its low-priced furniture and decor.
As part of its filing, Big Lots agreed to sell its business to private equity firm Nexus Capital Management for about $760 million, consisting of $2.5 million in cash plus its remaining debt and liabilities, court records show.
The company, which has more than 1,300 stores in 48 states, is one of the nation’s largest clearance retailers and specializes in offering bargain prices on all things home. In fiscal 2023, it generated about $4.7 billion in revenue, but sales have been steadily declining after pandemic-era demand for home furnishings plummeted.
In a news release and court documents, Big Lots said it will operate its business as usual but has begun the process of closing nearly 300 stores in order to clean up its balance sheet and cut costs.
“The actions we are taking today will allow us to move forward with new owners who believe in our business and provide us with financial stability, while optimizing our operational footprint, accelerating our performance improvement and delivering on our promise to be a 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 exceptional customer experience.”
Nexus CEO Evan Glucoft said the company is “confident” that Big Lots' “best days are ahead.”
“We are excited to have the opportunity to partner with Big Lots and help this iconic brand regain its status as America's leading extreme value retailer,” said Glucoft.
Big Lots has been on the brink for months after high interest rates and a sluggish housing market dampened demand for new furniture, decor and other home supplies. While discount retailers tend to do well in tough economic cycles, Big Lots caters primarily to lower- and middle-income consumers, who have cut back on discretionary spending at a faster pace than their wealthier counterparts.
“The company has been negatively impacted by recent macroeconomic factors, including high inflation and interest rates that are beyond its control,” Big Lots said in a press release. “The prevailing economic trends have been particularly challenging for Big Lots as its core customers reduced their discretionary spending in the household and seasonal product categories that represent a significant portion of the company's revenue.”
Beyond macroeconomic conditions, Big Lots also operates in a highly competitive space and has struggled to differentiate itself from other discount stores that offer home goods or specialize in the category, such as Wayfair, Walmart and TJX Companies.'Household items.
“Big Lots doesn't always offer good value for money. Many of the items it sells aren't high-end or overly expensive, but you can often find equivalent products for much cheaper at other stores, including Walmart,” Neil Saunders, CEO of GlobalData, said in a note.
“The other question [is] “The assortment is very confusing and cluttered, which is partly due to the way the business operates,” Saunders added. “However, there is too much variety and not enough treasures to attract consumers. This creates an unsatisfying shopping experience, especially compared to other players operating in the discount space, 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 a different buyer if that buyer outbids Nexus.
The company will collaborate with law firm Davis Polk & Wardwell, investment bank Guggenheim Securities and advisory firm AlixPartners. A&G Real Estate Partners has been chosen as Big Lots’ real estate advisor, while Nexus will be represented by law firm Kirkland & Ellis.
