We regret to inform Big Lots customers of some unfavorable information. Due to its growing financial difficulties, the cheap retailer with headquarters in Ohio intends to liquidate 35–40 locations by the year 2024. Big Lots blamed the closures on high inflation in a recent SEC filing, which had a big effect on consumer purchasing power.
The statement by Big Lots, a chain of over 1,300 shops throughout the country, disclosed that in 2022, 2023, and the first quarter of 2024, it had net losses and negative cash flow from operational operations. Despite being in compliance with its credit arrangements at the moment, the shop voiced doubts about its capacity to stay in compliance, citing anticipated operational losses in the future.
Big Lots said in the filing that it has concluded there is a significant likelihood that it will not be able to comply with the Excess Availability Covenant under the 2022 Credit Agreement and the term loan facility within the next 12 months, which raises substantial doubt about the company's ability to continue as a going concern. This conclusion is based on the company's current cash and liquidity projections as well as uncertainties regarding the mitigating effect of management's plans.
Big Lots intends to "vigorously pursue its plans to enhance its liquidity, improve the performance of the business, and avoid a covenant violation" in spite of the bleak prognosis. The firm is investigating options including lease concessions and deferrals, obtaining a letter of credit facility, controlling its working capital, and obtaining extra funding in order to increase liquidity. According to Chain Store Age, Big Lots is also thinking about selling its remaining real estate holdings outright or offering a sale and leaseback option in order to further monetize them.
Big Lots's first-quarter sales fell by 10.2% to $1 billion, with a 9.9% decline in comparable sales. The period concluded on May 4. CEO Bruce Thorn ascribed this fall to the retailer's core consumers' ongoing reduction in consumer spending, particularly on expensive discretionary products.
In the results announcement, Thorn said, "While we made substantial progress in improving our business operations in Q1, we missed our sales goals due largely to a continued pullback in consumer spending by our core customers."
Regarding the future, Thorn underlined that Big Lots is moving quickly to generate positive comparable sales growth through the end of the year and beyond 2025. The firm is committed to enhancing liquidity through a number of strategies, such as controlling inventories, capital expenditures, and operational costs, as well as obtaining a new $200 million term loan facility to provide more financial flexibility.
Big Lots had $573.8 million in long-term debt under its loan facilities and $44.0 million in cash and cash equivalents at the end of the first quarter of fiscal 2024. As the business continues to work through these financial difficulties and makes an effort to turn things around, its future is still unclear.