BIG UPDATE: Another major retail chain may soon file Chapter 11 bankruptcy
The retail sector saw a turbulent period in 2023, with several well-known chains such as Rite Aid, Bed Bath & Beyond, Party City, and Tuesday Morning filing for bankruptcy.
Some Chains Survive, Others Do Not
Party City managed to emerge from bankruptcy in October 2023, just in time to continue operations for Halloween. Rite Aid is also close to emerging from bankruptcy after gaining court approval for its reorganization plan.
Unfortunately, Bed Bath & Beyond and Tuesday Morning weren’t as fortunate, as both retailers liquidated their stores in 2023. However, Overstock.com acquired Bed Bath & Beyond’s brand and intellectual property, merging the companies as Beyond, which now operates online at Bedbathandbeyond.com.
New Wave of Retail Bankruptcies in 2024
Big-name retail chains have continued to face financial challenges in 2024. Fabric and crafts store Joann filed for Chapter 11 in March, while teen apparel retailer Rue 21 filed for bankruptcy and liquidated in May. Discount chain 99 Cents Only also filed for Chapter 11 and liquidated in April.
Other major retailers, such as mall-based clothing chain Express, filed for Chapter 11 bankruptcy in May but survived after closing around 95 stores. Home improvement competitor LL Flooring filed for Chapter 11 on August 11, seeking a sale of its assets.
Big Lots Faces Potential Bankruptcy Filing
Discount home goods retailer Big Lots (BIG) is considering filing for bankruptcy following years of declining sales, according to sources familiar with the company’s plans. The company is also actively seeking investors to inject capital and avoid a Chapter 11 filing. Earlier this year, Big Lots secured a loan to address its liquidity issues.
Big Lots Offers Retention Bonuses Amid Bankruptcy Speculation
The speculation around a potential Chapter 11 filing appears to have some merit. On August 12, Big Lots’ board of directors approved one-time cash retention awards totaling $5.24 million to four top executives, a move that often precedes a bankruptcy filing. These bonuses included $3.15 million for CEO Bruce K. Thorn, $969,938 for Chief Financial and Administrative Officer Jonathan A. Ramsden, and $561,068 each for Chief Legal and Governance Officer Ronald A. Robins Jr. and Chief Human Relations Officer Michael A. Schlonsky.
Stock Market Reaction to Bankruptcy Rumors
Whenever credible bankruptcy rumors surface about a public company, it typically results in a significant drop in stock prices, sometimes leading to trading halts.
This was the case with WeWork, the coworking space provider, in November 2023. After the Wall Street Journal reported that WeWork was planning to file for Chapter 11 bankruptcy, its stock plummeted by 66%, dropping from $2.52 to 82 cents. The company eventually filed for Chapter 11 bankruptcy on November 6, 2023.
Big Lots Stock Takes a Hit
For Big Lots, trading on its stock hasn’t been halted, but shares fell by about 14% in after-hours trading on August 28, reaching 80 cents after Bloomberg reported that the company was planning to file for bankruptcy. The stock had initially dropped by about 25% in earlier after-hours trading but has since seen some recovery.
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