Big Lots Files Chapter 11 Bankruptcy, Eyes Asset Sale to Nexus Capital

[Source – waka.com]

Company Struggles with Soft Sales and High Inflation

Discount retailer Big Lots files Chapter 11 bankruptcy protection, grappling with reduced consumer spending and weaker sales performance. The Columbus, Ohio-based retailer announced its plan to sell its assets and ongoing business operations to private equity firm Nexus Capital Management.

In a statement released on Monday, Big Lots files Chapter 11 bankruptcy, citing high inflation and rising interest rates as major factors behind decreased consumer spending on home and seasonal products, which are key revenue drivers for the company. According to FactSet, the retailer has experienced a decline in sales at stores open at least a year, a critical metric for evaluating retail performance, for nine consecutive quarters.

Despite efforts to improve its performance, Big Lots’ board concluded that selling the business to Nexus Capital was the most strategic decision. The company had delayed the release of its second-quarter results, which are expected later this week.

During the court-supervised sale process, Big Lots will continue its operations, selling goods through its stores and website. Although the retailer plans to close some locations, it has not disclosed the number or specifics of the affected stores. As of the end of 2023, Big Lots operated nearly 1,400 stores across 48 states.

Bruce Thorn, President and CEO of Big Lots stated that the company’s actions are aimed at facilitating a transition to new ownership that is committed to the business and can offer financial stability. Thorn emphasized that the sale will help the company optimize its operational footprint, enhance performance, and uphold its commitment to delivering extreme value.

Nexus Capital will act as a “stalking horse” bidder in the court-supervised auction, with the sale subject to potential higher bids or better offers. If Nexus Capital is ultimately selected as the winning bidder, the transaction is expected to be finalized in the fourth quarter.

Neil Saunders, managing director of GlobalData, commented that Big Lots appears to have lost customers in an increasingly competitive market where other value retailers are outperforming in terms of price and value. Saunders noted that the company must significantly improve its performance to succeed post-bankruptcy.

To support its operations during the bankruptcy process, Big Lots files Chapter 11 bankruptcy and secures $707.5 million in financing, including $35 million in new funding from existing lenders. This financing, pending court approval, along with cash from ongoing operations, is expected to provide sufficient liquidity for the company to complete the sale.

Additionally, Big Lots has received a notice from the New York Stock Exchange due to its stock’s average closing price falling below $1 for 30 consecutive trading days. This notice does not immediately result in delisting but gives the company an opportunity to appeal. In premarket trading, Big Lots’ shares dropped 40% to 30 cents.