The shocking move was confirmed on Thursday after a deal from a private equity firm failed to go through.
Nexus Capital Management LP was set to purchase Big Lots and assist in restructuring but has dropped out, per a press release.
As a result, all Big Lots locations have now begun liquidation sales.
Bruce Thorn, Big Lots president and CEO, said the company is still looking to complete another transaction with a different lender.
If that were to happen, Thorn noted the going-out-of-business process could “be reversed,” according to an internal email obtained by The Hill.
In the meantime, however, the CEO said the liquidation was the best course of action for Big Lots.
“We all have worked extremely hard and have taken every step to complete a going concern sale,” Thorn noted in the release.
“While we remain hopeful that we can close an alternative going concern transaction — in order to protect the value of the Big Lots estate, we have made the difficult decision to begin the [going-out-of-business] process.”
After the filing in September, Big Lots had planned to close around 545 stores by early 2025 to “optimize” its store footprint.
At least 295 initiated the shutdown process immediately, with an additional 250 to follow before January 15, 2025.
So far, 426 Big Lots locations have closed in 2024.
It had 1,389 stores across 48 states pre-bankruptcy.
Customers will still get service from Big Lots as normal in-store and online amid the going-out-of-business sales, per the Thursday release.
JOBS IN JEOPARDY
Still, employees will face job cuts.
Thorn noted a “reduction in (work) force is necessary,” with plans for corporate positions to be vacated as early as January 2025, per the internal email.
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
Many other staffers will receive a Worker Adjustment and Retraining Notification (WARN) notice.
A WARN notice is a document some employers are legally required to give their employees 60 days in advance before mass layoffs, per the US Department of Labor.
“I recognize this is difficult news for all of us,” Thorn wrote.
“You should be proud of the grit and resiliency you’ve demonstrated through what I know has been a challenging time.”
DEBT DISASTER
Rumors of Big Lots bankruptcy had been going on for several weeks before it finally submitted the Chapter 11 filing.
It noted about $3.1 billion in debt owed to multiple creditors and had recently recorded a net sales decrease of about $114.5 million from the first fiscal quarter of 2023 to 2024.
Big Lots struggled under macroeconomic pressures for some time, with high inflation, interest rates, and changes in consumer habits taking their toll.
Prominent furniture retailer Conn’s HomePlus also filed for bankruptcy earlier this year and has plans to close all locations.
Restaurants are also taking hits, as Red Lobster only recently came out of bankruptcy after filing in May and closing around 100 locations.