Big Lots, a nationwide discount homeware chain with nearly 1,400 stores, is facing significant financial challenges, raising concerns about potential mass closures and bankruptcy.
The Columbus, Ohio-based retailer recently informed financial regulators that it may not be able to continue as a ‘going concern.’ This declaration underscores the severe financial distress the company is experiencing.
Financial Struggles and Operational Challenges
Big Lots has consistently reported declining revenues for the past ten quarters. The company suffered a staggering $132 million loss in the first quarter of 2024 alone. Store managers have expressed their dissatisfaction, blaming headquarters for sending truckloads of unwanted products that do not appeal to customers.
In its latest filing with the Securities and Exchange Commission, Big Lots revealed that the cumulative losses from 2022 and 2023, combined with the substantial losses incurred this year, have nearly depleted its cash reserves. Retailers need substantial cash reserves to manage inventory costs. Executives admitted that they expect further operating losses and anticipate difficulties in complying with credit agreements later this year.
Efforts to Mitigate Financial Issues
Big Lots has attempted various strategies to cut costs, increase customer spending, and secure cheaper credit. However, these measures might not suffice to keep the company afloat. The filing explicitly stated that there is “substantial doubt about the company’s ability to continue as a going concern.”
The stock market has reflected these dire prospects. As of Wednesday, the company’s stock price had plummeted to $1.71, a 48 percent decline over the past month and an 81 percent drop this year. This is a stark contrast to its peak at $72.31 during the post-pandemic rally in 2021.
Store Closures and Broader Retail Challenges
Last year, Big Lots closed 52 stores, and it has already shuttered 13 more this year. The struggles of Big Lots are part of a broader trend affecting discount retailers in the U.S. These stores are more vulnerable to economic downturns, as they cater primarily to lower-income customers who are cutting back on spending due to persistent price increases over the past two and a half years.
In February, Big Lots began seeking fresh financing, according to Bloomberg News. Meanwhile, store managers have taken to Reddit to voice their frustrations about receiving excessive amounts of stock that customers are not purchasing. One manager recently wrote about receiving an unprecedented number of large shipments, filling the warehouse to capacity with items that are not selling. Another manager questioned the company’s purchasing strategy, suggesting that corporate should focus on stocking popular items rather than “cheap garbage nobody wants.”
The Retail Apocalypse
Big Lots’ predicament is emblematic of the so-called ‘retail apocalypse’ that has hit brick-and-mortar stores hard. Retailers are grappling with rampant theft and increasingly tight margins, leading to widespread store closures. As of mid-2024, nearly 2,600 stores have shut down.
In recent weeks, major retailers have also announced closures. Walmart has closed three more underperforming locations, and Rite Aid is shutting another 27 pharmacies. Dollar stores have been particularly hard-hit, with 99 Cents Only announcing in April that it would shutter all 371 of its locations across California, Texas, Arizona, and Nevada. Similarly, Family Dollar and Dollar Tree plan to permanently close 1,000 stores over the next few years.
Additionally, Pinto Ranch, a beloved Texas store frequented by celebrities like Drake, abruptly closed after two decades in operation. Bob’s Stores, which sells athletic and casual clothing across six states, also announced it would be shutting all its locations, though it plans to clear stock first with significant discounts.
Conclusion
The challenges faced by Big Lots highlight the broader difficulties confronting the retail sector. As the company battles financial woes and operational missteps, its future hangs in the balance, reflective of a retail landscape undergoing profound and turbulent changes. The coming months will be critical for Big Lots as it navigates these formidable challenges and seeks a path to stability.
