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Big Lots to close 35 to 40 stores; warns of ability to survive as ‘going concern’

Big Lots
Big Lots operates over 1,300 stores in 48 states.

Big Lots’ troubles are mounting,  

In an SEC filing, the Ohio-based discounter revealed it plans to close between 35 to 40 stores in 2024, putting the blame on elevated inflation that has put a damper on customers buying power. Big Lots, which has been working to shore up its liquidity the past few months, also raised doubts about its ability to survive. 

In the filing, Big Lots, which has over 1,300 stores nationwide, noted it had net losses and used cash in operating activities in 2022, 2023 as well as the first quarter of 2024. While it currently is in compliance with its credit agreements, the retailer said that it "expects to experience further operating losses and expects to experience difficulty remaining in compliance with such covenants."

“Based on our current cash and liquidity projections, and uncertainties with respect to the mitigating effect of management’s plans, the company has concluded there is a significant likelihood that it will be unable 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,” the company said in the filing. 

Although it hinted at going out of business, Big Lots also said in the fling it plans to "vigorously pursue its plans to enhance its liquidity, improve the performance of the business, and avoid a covenant violation." To improve its available liquidity, the company is evaluating alternatives including, but not limited to, lease concessions and deferrals, entering a letter of credit facility, managing its working capital and raising additional capital. 

It also is seeking to further monetize assets, such as its remaining owned real estate property, through outright sale or sale and leaseback opportunities. 

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Big Lots’ sales tumbled 10.2% to $1 billion in its first quarter, which ended May 4, with a 9.9% decrease in comparable sales. The retailer cited a continued pullback in consumer spending by its core customers.

“While we made substantial progress on improving our business operations in Q1, we missed our sales goals due largely to a continued pullback consumer spending by our core customers, particularly in high ticket discretionary items," CEO Bruce Thorn said in the earnings release.

Thorn added that, as Big Lots moves forward, it is taking aggressive actions to drive positive comp sales growth in the latter part of the year and into 2025, and to maintain year-over-year gross margin rate improvements. He also cited the company’ efforts to improve its liquidity. 

“We are pleased with our actions to preserve and enhance liquidity in Q1, which included aggressive efforts to manage opex, capex and inventory, and the execution of a new $200 million term loan facility, which provides us with significant additional financial flexibility,” Thorn stated in the release.

Big Lots ended the first quarter of fiscal 2024 with $44.0 million of cash and cash equivalents and $573.8 million of long-term debt under its lending facilities.

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