A Big Lots store in Los Angeles on Sept. 7, 2024. Discount home goods retailer Big Lots Inc. filed for Chapter 11 bankruptcy protection on Sept. 9, 2024, and said it plans to close about 300 stores while remaining open.
Eric Thayer | Bloomberg | Getty Images
Discount home goods retailer Big Lots The company filed for bankruptcy on Monday as high interest rates and a sluggish housing market have slowed demand for low-cost furniture and decor.
As part of its Chapter 11 bankruptcy filing, Big Lots agreed to sell the business to private equity firm Nexus Capital Management for $2.5 million in cash and remaining debt and liabilities totaling about $760 million, according to court records.
The company, which operates more than 1,300 stores in 48 states, is one of the largest closing-out retailers in the country and specializes in offering all things home at bargain prices. It had sales of about $4.7 billion for fiscal 2023, but sales have been steadily declining since the pandemic-era decline in demand for home furnishings.
Big Lots said in a press release and court filings that it will operate business as usual but has begun the process of closing about 300 stores to restructure its balance sheet and reduce costs.
“The steps we are taking today allow us to move forward with new owners who believe in our business and bring financial stability while optimizing our reach, accelerating our performance improvement and delivering on our promise to be the ultimate value leader,” CEO Bruce Thorne said in a news release. “As we navigate this process, we remain committed to offering great value, an easy shopping experience in our stores and online and a great customer experience.”
Nexus managing director Evan Gluckoft said the company was “confident” that Big Lots’ “best days are ahead.”
“We are thrilled to have the opportunity to partner with Big Lots and restore this iconic brand to its position as America’s leading great value retailer,” said Gluckoft.
Big Lots has been in crisis for months as high interest rates and a sluggish housing market have dampened consumer demand for new furniture, decor and other home items. While discount retailers tend to perform well in tough economic cycles, Big Lots caters primarily to low- and middle-income consumers, who are more tightly curtailing their discretionary spending than their wealthier counterparts.
“The company has been adversely affected by recent macroeconomic factors, including uncontrollable high inflation and interest rates,” Big Lots said in a news release. “Current economic trends have been particularly challenging for Big Lots as the company’s major customers have curtailed discretionary spending on household and seasonal items, which account for a significant portion of the company’s revenue.”
Beyond macroeconomic conditions, Big Lots operates in a highly competitive sector and has struggled to differentiate itself from other discount stores that sell home goods or specialize in those categories. Wayfair, Walmart and TJX Cos.‘Household items.
“Big Lots is not necessarily good value for money. Many of the products it sells are not luxury or extremely expensive, but comparable items can often be found for much less at other stores, including Walmart,” Neil Saunders, managing director at GlobalData, said in a note.
“Another problem is [is] “The selection is very cluttered and confusing, which is partly due to the way the business is run,” Sanders added, “but there’s too much choice and very few bargains to entice consumers. This makes for an unsatisfying shopping experience, especially compared to other companies operating in the discount sector, such as off-price retailers.”
As part of the bankruptcy process, Big Lots plans to hold a court-supervised auction of its business, which could be sold if another buyer outbids Nexus’ offer.
The company is partnering with law firm Davis Polk & Wardwell, investment bank Guggenheim Securities and consulting firm AlixPartners. A&G Real Estate Partners has been appointed real estate adviser to Big Lots, and Nexus is represented by law firm Kirkland & Ellis.
