It’s Saturday folks, and here we are again. Another retail giant, once riding high on the pandemic spending wave, is about to belly flop spectacularly into bankruptcy. This time, it’s Big Lots (aka Big Loss) - the Columbus, Ohio based discount retailer that's not only been selling overstocked, irregular merchandise since 1967…

(Source: Seeking Alpha) 

But the one company who played a major part in furnishing piss poor millennial homes back in 2020. You see, when Covid-19 was marketed as the 21st century's “Black Plague” and social distancing was a culture shock to all the extroverts out there, Big Lots was absolutely raking it in. 

People were stuck at home, panic-buying discount furniture like their lives depended on it. In fact, if it wasn’t for this tried and true discount retailer, my wife and I’s one bedroom apartment in Florida wouldn’t have had the couch, the TV stand, the bed frame, and so many other things if it weren’t for Big Lots cheap prices (you’ll always be in my heart, Big Lots). 

(Source: CNN) 

Additionally, quite a few others (broke as a joke American millennials) felt the same as Big Lots sales and profits catapulted, leading the stock to a pandemic high of over $70. However, fast forward to today, that very same stock is worth… wait for it… a whopping half dollar. Yep, only 50 shiny bronze Lincolns. For more context, Big Lots has plunged nearly -94% YTD mainly due to rising inflation and less spending. Shocker…

(Source: Giphy) 

For instance, Big Lots reported a casual $205 million net loss in Q1 of this year, which is kind of like lighting a dumpster on fire and then wondering why it smells so bad. And now, after a series of "strategic" missteps, they're preparing to file for Chapter 11 bankruptcy after mysteriously postponing their Q2 earnings (I wonder why?). 

(Source: Market Watch) 

Again, the main thorn in the flesh for Big Lots has come from the fact that America’s lower-income shoppers are in a bit of a bind. With inflation hitting harder than a Black Friday crowd at Walmart, folks are spending more on essentials like food and housing, and less on things like discount throw pillows or that dusty clearance section furniture Big Lots has been trying to push.

Which is why, despite their best efforts at a turnaround—slashing prices, pivoting back to their "discount roots" (they were already cheap though?), and trying to stay relevant - all seems to be lost as Big Lots is officially planning to sell it’s list of 1,400 stores in a court-supervised process  to the highest bidder willing to take on this hot mess of a company. 

(Source: Reuters) 

Surprisingly though, they seem to have already lined up a so-called “stalking horse” bidder (which sounds way cooler than it is) to buy them out of bankruptcy. Side note: A “stalking horse” is basically someone willing to take the first bite at the apple in a bankruptcy sale—except in this case, the apple is probably overripe and bruised, much like Big Lots’ balance sheet. 

(Source: Giphy) 

But with that said, Big Lots isn’t alone in it’s soon to be death this year. Party City, Bed Bath & Beyond, and a slew of other middle- and lower-income retailers have already gone down this path. The problem? The people they’re targeting—those scraping by in today’s economy—are more interested in paying rent and buying groceries than splurging on discounted lamps. Translation: We need more stimmy checks. Translation #2: Just kidding, that world be horrific for the economy, boosting inflation to unseen levels. 

(Source: Giphy) 

Neil Saunders, managing director at GlobalData Retail put it best as he stated “There’s a major bifurcation of performance”. Which is basically just a Wall Street way of saying “Rich people are still doing okay, and poor people are screwed.” Which again, is why the Big Lots of the world, who cater to the latter, are getting hit the hardest.

On the other hand though, it’s not all retail that Big Lots has struggled to gain traction with. For example, like every struggling retailer these days, Big Lots has recently inked a $318 million sale-leaseback deal to raise some cash. For the uninitiated, a sale-leaseback is when you sell your property and then rent it back from the buyer. It’s basically the business equivalent of pawning your TV to pay rent. Desperate times, desperate measures, right?

(Source: Retail Dive) 

However, the sad reality that Big Lot executives have come to find out, is that even that deal can’t raise enough cash to plug the holes of the sinking boat. Which is why Big Lots is now looking at reorganization under Chapter 11 of the U.S. bankruptcy code, in order to merge from this mess with a business that’s still somehow viable. 

But let's be real here shall we? The retail landscape is littered with the corpses of once-great companies who swore they’d come out stronger after bankruptcy, only to fade into irrelevance faster than “Occupy Wall Street”. 

(Source: Reddit) 

So what’s the takeaway here for investors this weekend? Well, in short, the writings on the wall, and Big Lots is in deep sh^t. Sure, they’ll try to claw their way out of this mess, but in a world where Walmart and Target (more credible) are price gouging their competitors left and right… It's hard to see how Big Lots will stay alive. 

(Source: QZ) 

With that said though, any sort of comeback will remain to be seen for quite some time. And while, some may scour the financial media for any clues to capitalize on this Big Lots bankruptcy…

(Source: Giphy) 

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(Source: Giphy) 

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Stocks.News holds positions in Walmart as mentioned in the article.