Big Lots’ plan to bring back the bargains will have to be carried out under new ownership. The closeout retailer filed for bankruptcy early Monday morning and plans to close more stores – but it expects to emerge from bankruptcy after selling to a new owner who’s committed to “owning the extreme bargain space.”
The bankruptcy filing shortly after midnight names an affiliate of investment firm Nexus Capital Management as Big Lots’ proposed new owner. That’s subject to the bankruptcy court’s approval, and subject to potential higher bids from other interested parties.
Either way, the news will come as a relief to shoppers and employees who feared Big Lots may have gone away for good. Over the summer, the retailer closed more than 300 stores, or about a quarter of its locations, after it warned that financial challenges put its very future in “substantial doubt.” And more store closings are coming – in a statement, Big Lots said it is “continuing to assess its operational footprint, which will include closing additional store locations.”
“The actions we are taking today will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value,” CEO Bruce Thorn said in a statement.
Bankruptcy was not the result the company had hoped for when it introduced a back-to-basics turnaround plan aimed at getting customers excited about shopping at Big Lots again. Earlier this year, the company outlined plans to “reclaim its bargain heritage,” emphasizing an ever-changing collection of thrill-of-the-hunt closeout items – just the way its stores used to be. “There was a time where we owned the closeout buyout market,” a Big Lots employee wrote this past week on a Reddit message board. Over time, though, Big Lots turned into what the employee called a “fake discount store.”
About a decade ago, Big Lots decided its customers wanted consistency. So it identified hundreds of mostly food and household products as being “never-out” items, guaranteed to be in stock at all times. That way, customers could come to Big Lots with a shopping list instead of wandering the aisles looking to see whatever happened to be available for sale that day.
And for customers looking for more than just pantry staples, Big Lots began offering more higher-priced items like furniture. But with the new emphasis on grocery items and furniture, a visit to Big Lots didn’t feel like a true bargain hunt anymore.
So earlier this year, company executives promised to “focus on delivering extreme bargains and unmistakable value to our customers,” while “reducing our nondifferentiated never-out assortment.” The goal, Thorn said, was to provide “greater breadth and less depth to create more reasons for customers to frequently visit and take advantage of deals while supplies last,” expanding its “extreme bargains” to represent up to 75% of all items sold.
And the retailer could point to some successes – back in August, Big Lots announced “the acquisition of its biggest extreme bargain Halloween closeout ever,” after purchasing $11 million worth of overstock from “a well-known national party supply retailer.” That came several months after Big Lots acquired the entire inventory of the Hearthsong brand of toys. “Our ongoing efforts to find high-demand products at unbeatable prices are accelerating, with new closeout deals and truckloads of bargains arriving at stores every week,” Thorn said.
But the new items and new approach may have come too late to resonate with many shoppers. In its last quarterly earnings report in June, the company reported a loss of $205 million, with sales down 10% from the same time last year. “While we made substantial progress on improving our business operations,” Thorn said, “we missed our sales goals due largely to a continued pullback in consumer spending by our core customers.” The company’s performance, he said, “does not yet reflect the stronger business model that we’ve created.”
Some observers say a significant turnaround was never going to be that easy. “Management has been keen to blame a pressured consumer for the decline in its fortunes,” Neil Saunders, Managing Director and Retail Analyst at GlobalData Retail, wrote in a recent LinkedIn post. But other discounters are doing all right, “so something else must be going on,” he wrote. The bottom line, he concluded, was that “Big Lots is not always good value for money. Many of the items it sells are not high end and are not drastically expensive, but equivalents can often be found much cheaper at stores like Target and Walmart.”
Employees in that Reddit thread agreed. “We can’t compete with Walmart, Target, or Dollar General. Instead we should be buying their overstock, last year’s models, and returns.” Big Lots’ new strategy was “a day late and a dollar short, at this point.”
Big Lots’ expected new owners hope to prove them wrong. “We are excited to have the opportunity to partner with Big Lots and help return this iconic brand to its status as America’s leading extreme value retailer,” Nexus Managing Director Evan Glucoft said in a statement. “The Big Lots business has incredible potential and we are confident that its greatest days are ahead.”
There’s no indication just yet as to which stores or how many of them might end up closing. Big Lots fans most likely hope their local store is not on that list. But if your store ends up being one that’s having a going-out-of-business sale, at least one of Big Lots’ goals will be realized – as everything really will be an “extreme bargain.”
Image source: Big Lots
I wouldn’t mind the one near me closing so an Aldi can go in there.