According to The Street, The retail sector has struggled since the Covid-19 pandemic, leading to financial distress and a wave of bankruptcy filings among various companies. Retailers have grappled with store closures, supply chain issues, a shift in consumer preferences away from brick-and-mortar malls and shopping centers, and rising labor costs—all contributing to declining revenues.
Rite Aid’s Significant Chapter 11 Filing
The most significant retailer bankruptcy in the past year was Rite Aid’s Chapter 11 filing on October 15, 2023. The company sought to reorganize, reject store leases, and close underperforming locations. Initially planning to close 154 stores, the number expanded to over 800 by August. Rite Aid successfully exited bankruptcy on September 3.
LL Flooring’s Shift in Strategy
In another notable case, LL Flooring, a rival of Home Depot, filed for Chapter 11 bankruptcy on August 11. The company aimed to sell its assets but ultimately decided to liquidate and close 430 stores after two sale proposals fell through. However, on September 5, LL Flooring reversed its course after reaching a sale agreement with private equity firm F9 Investments. This deal involved the purchase of 219 stores, allowing the company to continue operating. Despite this turnaround, LL Flooring still closed 211 stores.
Big Lots’ Struggles and Bankruptcy Filing
Discount home goods retailer Big Lots also faced significant challenges, filing for Chapter 11 protection on September 9 in the U.S. Bankruptcy Court for the District of Delaware. The retailer sought a sale of its assets to its stalking-horse bidder, Nexus Capital Management, which placed a $760 million bid. This bid included $2.5 million in cash, debt payoff, and the assumption of liabilities.
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The court scheduled an auction for October 18, contingent on receiving multiple bids, with a hearing to approve the sale proposed for November 4. Big Lots listed $1 billion to $10 billion in assets and liabilities, including $556.1 million in funded debt obligations consisting of a $433.6 million asset-based lending facility and a $122.5 million term loan.
In its court filings, Big Lots cited several macroeconomic and industry-specific challenges as reasons for its bankruptcy. High competition, disruptions caused by Covid-19, a high interest rate environment, and an unreliable supply chain that increased operating costs were significant factors. The company also noted that elevated inflation had adversely impacted its customers’ purchasing power, making them hesitant to buy big-ticket discretionary items.
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