Retail Alert: Another Major Chain on the Brink of Chapter 11 Bankruptcy
According to The Street, 2023 proved to be a challenging year for major retail chains, with several well-known companies filing for bankruptcy. Among them were Rite Aid, Bed Bath & Beyond, Party City, and Tuesday Morning, signaling a turbulent time for the retail sector.
Emergence and Liquidation
In a positive turn, Party City successfully emerged from bankruptcy in October 2023, just in time for the Halloween season, allowing it to continue operations. Rite Aid, too, is on the brink of recovery, having received court approval for its reorganization plan and preparing to emerge from bankruptcy.
However, not all retailers were as fortunate. Bed Bath & Beyond and Tuesday Morning faced liquidation, closing their doors for good in 2023. In a surprising twist, Overstock.com acquired the Bed Bath & Beyond brand and its intellectual property, merging it with its existing operations as “Beyond,” which now functions online at Bedbathandbeyond.com.
Continued Bankruptcy Filings in 2024
The trend of bankruptcy filings has continued into 2024, with several major retail chains seeking Chapter 11 protection. Joann, the fabric and crafts store, filed for Chapter 11 in March 2024, while Rue 21, a teen apparel retailer, liquidated its assets after filing for bankruptcy in May 2024. Similarly, discount chain 99 Cents Only filed for Chapter 11 in April, leading to its liquidation.
Express, a mall-based clothing retailer, also filed for Chapter 11 in May, managing to survive the process by closing approximately 95 of its stores. Meanwhile, LL Flooring, a competitor to Home Depot, filed for Chapter 11 on August 11, aiming to sell its assets as part of its restructuring efforts.
Big Lots’ Uncertain Future
Amid these developments, discount home goods retailer Big Lots is reportedly considering a potential bankruptcy filing after struggling with declining sales. According to sources familiar with the situation, the company is actively seeking investors to inject capital and avert a Chapter 11 filing. Earlier in the year, Big Lots secured a loan to address liquidity issues.
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Rumors of a potential bankruptcy filing are not unfounded. The company’s board of directors approved one-time cash retention awards totaling $5.24 million for four top executives on August 12, a common practice before filing for bankruptcy. These bonuses included $3.15 million for CEO Bruce K. Thorn, $969,938 for CFO Jonathan A. Ramsden, and $561,068 each for Chief Legal Officer Ronald A. Robins Jr. and Chief Human Relations Officer Michael A. Schlonsky.
Market Reactions to Bankruptcy Rumors
The prospect of bankruptcy often triggers significant market reactions, as evidenced by the experience of WeWork. In November 2023, reports surfaced indicating that the coworking space provider was planning to file for Chapter 11 bankruptcy. Following this news, WeWork’s stock plummeted by 66%, dropping from $2.52 to a low of 82 cents, including a staggering 46% decline following the report by the Wall Street Journal. WeWork ultimately filed for Chapter 11 on November 6, 2023.
In the case of Big Lots, while trading has not been halted, the company’s stock saw a significant drop on August 28, falling by about 14% in after-hours trading to 80 cents after Bloomberg reported on potential bankruptcy plans. The stock had previously declined by approximately 25% in earlier trading sessions.
Conclusion
The retail landscape remains volatile as major chains navigate financial challenges and restructuring efforts. With the trend of bankruptcy filings continuing into 2024, both consumers and investors are closely monitoring the fate of these well-known retailers.
