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Lately, many consumers have opted not to spend too much money, and that has hit retailers pretty hard. Huge national brands like Bed, Bath & Beyond, Tuesday Morning and Christmas Tree Shop have had to declare bankruptcy and close up all of their locations, while Sears, Pizza Hut, CVS, Rite Aid, Walgreens and Boston Market have been shuttering many of their stores due to financial woes. Now, another big retailer might fall victim to the economic conditions as well. Big Lots has been struggling in recent months due to sluggish sales, and some experts think it could be very problematic for them, but the company is taking steps to prevent bankruptcy.
Data from financial information publisher Credit Risk Monitor suggests that Big Lots is in jeopardy of going bankrupt. By using in-depth analysis, Credit Risk Monitor assigns a FRISK Score to a company, which represents its probability of declaring bankruptcy. Big Lots got nearly the worst score - a 2, which means there is between a 4% and 10% chance that they will be bankrupt in the next 12 months. The score has had a 96% accuracy rate in predicting bankruptcies, so it is pretty credible.
Execs at the company are well aware of their standing and what caused it. During a recent earnings call, CEO Bruce Thorn stated, "For the past year and a half, we've been playing defense as the consumer environment quickly and sharply deteriorated. High inflation has disproportionately impacted our lower-income customers, who have delayed or pulled back spending on discretionary items, particularly in high ticket home and seasonal categories, which were already challenged by the post-COVID spend shift away from home categories."
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To help right the ship, Big Lots sold some of their properties and leased the locations back, giving them a $200 million boost. Thorn explained, "Combined with our efforts to aggressively manage costs, inventory, and capital expenditures, we are prepared and positioned to navigate through the current economic challenges. On the cost reduction and productivity front, we are well on track to achieve our structural SG&A savings goal of over $100 million in 2023."
The company might have some struggles ahead though since vendors tend to demand more stringent terms, or even payment upfront, when dealing with an entity facing bankruptcy, and that might put a strain on Big Lots. However, that isn't stopping them from trying new things - they are transforming ten stores into a new concept called Big Lots Home that focuses on furniture and decor.