Big Lots has filed for Chapter 11 bankruptcy in Delaware and agreed to sell its assets and business operations to an affiliate of Nexus Capital Management.
Under the sales agreement, Nexus will serve as the ‘stalking horse bidder’ in a court-supervised auction and will close the transaction in the fourth quarter should it be deemed the winning bidder.
The Chapter 11 filing and sales agreement come as the discount retail chain suffered from weakened discretionary spending amid macroeconomic challenges despite focusing on improving profitability since the pandemic.
The court-supervised sale process will allow the company to continue evaluating its operational footprint, which will include shutting additional stores.
“Though the majority of our store locations are profitable, we intend to move forward with a more focused footprint to ensure that we operate efficiently and are best positioned to serve our customers,” said Bruce Thorn, Big Lots president and CEO.
“To accomplish this, we intend to use the tools afforded by this process to continue optimizing our store fleet in an orderly manner.”
Big Lots has secured $707.5 million of financing commitments, which, along with cash generated with the company’s ongoing operations, will provide liquidity to support the business as it completes the sale transaction.
Meanwhile, Big Lots noted improved comparative sales in the second quarter as compared to the prior quarter.
“Additionally, Q3 to date is off to a good start, with a significant sequential improvement in underlying comp sales relative to Q2, as well as underlying gross margin expansion versus last year,” said Thorn.
“We expect the positive momentum to continue into the back half of the year.”
Neil Saunders, MD of GlobalData, said that filing for bankruptcy will help Big Lots gain stability but noted that restructuring is only part of the solution.
“Big Lots operates in a very crowded and competitive market where other value players do a far better job of delivering on low prices and compelling bargains,” said Saunders.
“It needs to step up its game if it is to succeed post-bankruptcy.”
