Big Lots Brand Check-up: The Bargain Promise It Let Slip
Big Lots filed for Chapter 11 on September 9, 2024, and agreed to sell substantially all of its business to an affiliate of Nexus Capital Management. It still ran 1,389 stores in August, but net sales had fallen from a record $6.2 billion in fiscal 2020, and its shares closed at about 7 cents on October 29. We look at how a closeout retailer lost its bargain edge.
Key takeaways
- Big Lots filed for Chapter 11 on September 9, 2024, with an affiliate of Nexus Capital Management as stalking horse bidder and $707.5 million in financing commitments.
- Net sales fell from a record $6.2 billion in fiscal 2020 to $4.72 billion in fiscal 2023, a year with a net loss of $481.9 million and comparable sales down 13.5%.
- Its chief financial officer said a 2013–2018 shift away from closeouts led to higher prices and less traffic, and bargains reached nearly 60% of sales only in late 2023.
- The shares closed at an all-time high of $72.31 in June 2021 and at about 7 cents over the counter on October 29, 2024, after the NYSE suspended trading.
Download the full Big Lots Brand Check-up (PDF): vital signs, timeline, diagnosis, treatment and sources.
What happened
On September 9, 2024, Big Lots and its subsidiaries filed for Chapter 11 in Delaware and agreed to sell substantially all of the business to an affiliate of Nexus Capital Management. Nexus was the stalking horse bidder, so better offers were possible. The company secured $707.5 million in financing commitments, including $35 million in new financing, and expects a sale to close in the fourth quarter if Nexus wins. The filing accelerated about $556.1 million of debt under its credit agreements.
The New York Stock Exchange suspended trading in the shares the same day. The stock had closed at an all-time high of $72.31 on June 8, 2021. On October 29, 2024, it closed at $0.068 over the counter.
Symptoms in the numbers
Big Lots called fiscal 2020 “the strongest year in the history of Big Lots,” with net sales of $6.2 billion and comparable sales up 16.1%. In fiscal 2023, net sales were $4.72 billion and the net loss was $481.9 million. Comparable sales fell 13.5% that year, then 9.9% in the first quarter of 2024 and 5.3% in the second.
Big Lots ran 1,389 stores at August 3, 2024, and announced the closure of 296 in the third quarter, after its lenders raised the number of permitted closings from 150 to 315.
Diagnosis
The first cause is drift away from closeouts. Retail Dive reported that between 2013 and 2018 the company refocused away from closeout products and extreme bargains, a shift that, chief financial and administrative officer Jonathan Ramsden said in court documents, “resulted in higher average product prices, diminished customer traffic and stagnating sale volume”. A retailer whose brand positioning rests on the thrill of a find cannot creep toward ordinary prices and keep the thrill.
The second cause is weight on big-ticket home goods. Furniture made up 25.0% of fiscal 2023 net sales, and the company said economic pressure cut its customers’ discretionary spending, particularly on large-ticket furniture and seasonal products. In March 2024, Ramsden said furniture units were down more than sales against 2019 because average unit prices were higher. Chief executive Bruce Thorn said Big Lots would “solidify our position as America’s Discount Home Store.”
The third cause is a crowded middle. Big Lots’ annual report lists general merchandise, discount, home, food and furniture retailers among its competitors. GlobalData’s Neil Saunders told Retail Dive that “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.” He added that its assortment offers too much choice and too little treasure. When shoppers compare prices closely, a blurred pricing strategy costs visits.
The fourth cause is time bought by selling property. In 2023 the company sold a distribution centre and 23 owned stores in sale and leaseback deals for $305.7 million. That raised cash. It did not bring shoppers back.
The treatment it tried
Under Thorn, who became chief executive in 2018, Big Lots turned back toward bargains. Bargains made up nearly 60% of sales in the fourth quarter of 2023, and the company set goals of 75% bargain penetration, including 50% extreme bargains, by the end of 2024. Thorn said “Extreme bargains provide significant savings over price leaders and are working,” and the comparable sales decline narrowed from 9.9% in the first quarter to 5.3% in the second. The turn came late, after years of weaker traffic.
Prognosis
As of October 29, 2024, the stores and website remain open under court protection, and the company has said its shares will likely be cancelled. We are watching how many stores the buyer keeps, whether the bargain push holds up through the holidays, and whether the new owner gives shoppers one clear job to hire Big Lots for.
What growing companies can learn
A value brand lives on one promise. Big Lots let that promise blur, leaned on big-ticket goods, and returned to bargains only after traffic had weakened for years. If customers come to you for one reason, measure it, protect it and fund it before you chase a bigger basket.
This check-up uses public information available on October 29, 2024. It is brand and marketing analysis, not investment advice.
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