Big Lots, the well-known off-price home goods retailer, is facing a critical juncture in its business journey. The company, which operates about 1,400 stores across the United States, is reportedly considering filing for bankruptcy. This comes after years of declining sales, putting the retailer in a precarious financial position.
According to sources familiar with the situation, Big Lots is exploring various options to avoid Chapter 11 bankruptcy. One of these options includes seeking new investors to inject much-needed capital into the business. However, these plans are not set in stone and could change as the company navigates its financial challenges.
The news of potential bankruptcy has already had a significant impact on Big Lots’ stock. After the information became public, the company’s shares plummeted by 30% in after-hours trading in New York, reflecting investor concerns about the retailer’s future.
RIP $BIG LOTS from high of $73.23 in 2021 too .93 cents today! Gotta love Biden economics! pic.twitter.com/n2eI5dMwRq
— Shane O'Brien (@ShaneO_Brien) August 28, 2024
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Based in Columbus, Ohio, Big Lots has been working with AlixPartners LLP, a well-known consulting firm, to help turn its fortunes around. This partnership suggests that the company has been actively seeking solutions to its financial woes for some time.
In an effort to shore up its finances, Big Lots secured a loan earlier this year to help manage its cash flow issues. More recently, the company has been on the hunt for additional financing. These moves indicate that Big Lots is running out of options in its quest for financial stability.
One tell-tale sign of trouble is the company’s decision to approve sizeable retention bonuses for its top executives. On August 12, Big Lots greenlit one-time payments totaling over $5 million for its key management personnel.
While this might seem counterintuitive for a company in financial distress, it’s actually a common practice in corporate restructurings. These bonuses are designed to keep essential leadership in place during turbulent times, especially if the company ends up filing for Chapter 11 bankruptcy.
Big Lots isn’t alone in its struggles. The retail sector, particularly in the home goods segment, has been facing challenges due to a slowdown in consumer spending on household items.
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This trend has already claimed some casualties in the industry. Conn’s Inc., a furniture retailer, filed for bankruptcy in July. Similarly, LL Flooring Holdings Inc., previously known as Lumber Liquidators, took the same step earlier this month.