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As its financial troubles deepen, big Lots faces growing fears of bankruptcy, with its stock value hitting a record low. This concern follows the company's recent closure of 50 stores last year and plans to shut down up to 40 more soon.
Big Lots Faces Bankruptcy Risk
Big Lots has hit another all-time low as the risk of bankruptcy becomes more apparent. On July 8, 2024, the retailer's stock fell by another 4%, marking a significant drop of 82% year-to-date, starkly contrasting to the S&P 500's 16% gain, as Seeking Alpha revealed.
The store's financial struggles are deepening amid declining liquidity and the high cost of living that continues to impact shoppers. In its latest financial update, Big Lots reported a $4.51 loss per share for the ninth quarter.
This loss was mainly due to a 10% fall in sales, which the company attributes to reduced consumer spending and numerous underperforming stores.
Despite plans by CEO Bruce Thorn to increase store visits and achieve a 75% focus on bargains, Big Lots announced it might close up to 40 stores.
The company also expressed concerns over potentially not meeting the requirements of its loan agreement, which could lead to default.
Furthermore, according to The U.S. Sun, a recent SEC filing highlights that Big Lots has struggled with a dwindling cash reserve since 2022.
The report indicated that the company's ongoing losses and cash usage in its operations over the past few years, along with its current financial forecasts, seriously question its ability to sustain operations.
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Company executives admitted that they anticipate further losses and challenges in meeting the terms of their credit agreements. Despite these difficulties, Big Lots is determined to boost its liquidity and business performance to avoid breaching its financial agreements.
The retailer also reported a significant revenue decline in the year's first quarter, with net sales falling more than $114 million compared to the same period in 2023.
Caution Advised for Big Lots Investors
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Seeking Alpha investor Yiannis Zourmpanos advises investors to strategically plan their exits from Big Lots strategically, citing the company's severe financial distress, major liquidity problems, and an increasing debt load worsened by high interest rates.
Zourmpanos predicts that Big Lots is likely to face bankruptcy within the next one to two years. He has revised his investment recommendation to "Sell," a view that other Seeking Alpha contributors also support.
Meanwhile, Wall Street analysts are more cautious, maintaining a "Hold" rating on the stock. Seeking Alpha's Quant Rating categorizes Big Lots as a "Strong Sell."
As Franchise Herald recently reported, Big Lots has announced that closing some of its stores is part of normal business adjustments for retailers.
This includes a location in Leesburg, Virginia, at the Battlefield Shopping Center, which will shut its doors in April. The store is roughly 40 minutes northwest of Washington, DC.
The company, founded in 1967 by Sol Shenk as Consolidated International, Inc., originally thrived on selling closeout merchandise, including auto parts and vehicles. By 1982, it had started the Odd Lots/Big Lots chain. In 2001, it rebranded all stores to Big Lots, aiming for greater customer experience and company culture uniformity across over 35,000 employees.
Today, as inflation remains high, consumers are cutting back on spending, a trend affecting retailers nationwide, including Big Lots.
Related Article: Big Lots to Shut Down Up to 40 Stores in Latest Round of Closures
