Is Big Lots the Next Retailer to Keep on the Credit Risk Radar?
Big Lots Inc. tried to capture market share when Bed Bath & Beyond went bust, but now the retailer of 1,400-plus stores could find itself at risk of bankruptcy, too.
Some of its problems stem from United Furniture‘s sudden shut down and bankruptcy in the past year, forcing Big Lots to find an alternate home furnishings supplier.
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Retailers in the home goods sector have been particularly hit hard recently. Besides the Bed Bath & Beyond bankruptcy, Tuesday Morning in February filed for its second Chapter 11 petition in less than three years. And Christmas Tree Shops, which Bed Bath & Beyond previously sold to Handil Holdings, filed for bankruptcy in May.
It doesn’t help that inflation is giving shoppers sticker shock. They’re worried about affording the basics, and don’t have as much leftover to spend on nice-to-haves like new furniture or clothing. Big Lots sells shelf-stable pantry staples, but not the fresh food that Walmart and Target carry to draw customers and shore up other parts of the business.
Two years ago Big Lots tried to broaden its appeal by carrying more branded and private-label fashion merchandise. Back then, the Columbus, Ohio-based chain was in good shape financially with net sales up 13 percent to $1.63 billion. But federal stimulus checks were responsible for much of the increase in consumer spending that year.
Things have changed since then, however. Big Lots reported a bigger net loss of $249.8 million, according to numbers for the second quarter that ended July 29. On top of that, net sales fell 15.4 percent to $1.14 billion and comparable sales came in down 14.6 percent.
Big Box quickly followed that quarter by netting $294 million from an August sale-leaseback deal involving a California distribution center and 22 owned stores
In a statement about the quarterly performance, Big Lots CEO Bruce Thorn said the results during a “challenging environment” reflect the “significant pressure” on low-income customers, who have “limited capacity for higher-ticket discretionary purchases.”
When bankrupt Bed Bath & Beyond stopped accepting its iconic blue coupons this year, Big Lots seized the opportunity to steal away customers by honoring the 20-percent off discount on purchase of $50 or more. “For anyone who has missed their last opportunity to redeem one of these coupons, Big Lots is opening our doors to help you save on your entire purchase,” Thornton said when the promotion was announced.
Today, Big Lots is hoping to drum up holiday season as early as possible. Every Friday since Oct. 6 through Dec. 22, it’s hosting what it calls a Black Friday store sale with deals up to 50 percent off. This could entice consumers to spend and change the narrative on the “negative comp sales” Thornton expects in a highly promotional second half holiday period that could bring the lowest sales growth since 2018.
According to the CEO, Big Lots wants to “get back to playing offense” by cutting costs and improving productivity.
The Street first reported on a possible bankruptcy risk, citing data from Credit Risk Monitor.
