Big Lots Inc., an American discount store retailer, has filed for Chapter 11 bankruptcy protection in Delaware after years of decline.
Chapter 11 Bankruptcy Protection allows companies to continue operating while developing a repayment plan for creditors. According to regulatory documents, as of May this year, the company had nearly 1400 stores.
According to a statement from the company, the Columbus, Ohio based company stated that it is seeking court protection after years of declining same store sales and a large number of store closures.
Generally speaking, the company responsible for bankruptcy liquidation initiates a bid for the assets of the bankrupt company, and the company's selection and bid price must be approved by the court before the bid is opened to other companies. Through this approach, bankrupt enterprises can ensure that their assets are priced reasonably in the market while protecting the interests of initial bidders.
The 'Winter' of Discount Retailers
As a discount retailer, BiLotto mainly sells household items, furniture, electronic products, and seasonal goods. However, in recent years, there have been significant changes in the consumption habits of American consumers, particularly with a decrease in spending on non essential items. This change directly affects the sales and profitability of BiLotto, leading to the company's recent financial difficulties that are difficult to alleviate.
The decline in sales has brought great troubles to BiLotto, especially in recent quarters where the worsening inflation rate has squeezed the wallets of consumers with limited budgets.
The stock price of BiLotto reached a peak of over $72 in April 2021, but now it has plummeted to less than $0.50. This means that in the past three and a half years, the drop in the lottery has exceeded 99%.
Not only must the lottery be played, but other discount retailers are also struggling. Dollar Tree, a Fortune 150 company that started as a "one dollar store," announced a 20% drop in its annual profit guidance before the US stock market on Wednesday, September 4th.
Jeff Davis, Chief Financial Officer of Dollar Tree, stated in a statement that the downward adjustment of the full year sales guidance is mainly due to the increasing impact of macroeconomic pressures on the purchasing behavior of Dollar Tree's high-income customers, resulting in weaker sales, especially in the sales of non essential consumer goods.
After the financial report was released, Dollar Tree's stock price jumped short and opened nearly 11% lower last Wednesday, closing down about 22% for the day. Since the beginning of the year, the cumulative decline has reached 53%.
Similarly, US retailer Dollar General's second quarter results released before the market on Thursday (September 5th) fell short of expectations and significantly lowered its full year performance guidance.
The CEO of the company, Todd Vasos, also acknowledged that consumers are under pressure in the current environment of high inflation and interest rates, and the weak sales trend is partly attributed to the financial difficulties of core customers.
The poor performance guidance caused Dollar General's stock price to plummet by over 30% after opening last Thursday, with a cumulative annual decline of 41%.