Another Discount Retailer Closes Doors: Chapter 11 Bankruptcy Filed
According to The Street, In the past two years, brick-and-mortar retail stores have faced significant financial distress due to various challenges. These issues stem from inflationary pressures, including rising labor, freight, and goods costs; lingering effects of the COVID-19 pandemic; increasing interest rates; and a noticeable shift in consumer behavior away from traditional malls and shopping centers.
Retail Bankruptcies and Closures
Several major retailers have been affected by these trends. In 2023, both Rite Aid and Party City filed for Chapter 11 bankruptcy but managed to exit while still operating stores. In contrast, Bed Bath & Beyond and Tuesday Morning filed for bankruptcy and closed all locations during the same period.
LL Flooring’s Strategic Move
LL Flooring, a home improvement retailer, filed for Chapter 11 bankruptcy on August 11, 2024, leading to the closure of 211 stores. However, the company successfully sold 219 stores to F9 Investments, which plans to operate them as a going concern.
Difficulties for Discount Retailers
Discount retail chains faced significant hurdles in 2024. 99 Cents Only filed for Chapter 11 bankruptcy on April 8, later transitioning to Chapter 7 bankruptcy to close and liquidate all 371 stores located in Arizona, California, Nevada, and Texas.
Big Lots in Financial Trouble
Big Lots, which began 2024 operating 1,392 stores across 48 states, filed for Chapter 11 bankruptcy on September 9. The company aims to sell its assets to Nexus Capital Management for a $760 million bid, which includes $2.5 million in cash, debt payoff, and assumption of liabilities. The court has scheduled an auction for October 18 if more than one bidder submits an offer, with a hearing to approve the sale proposed for November 4.
Since filing for bankruptcy, Big Lots has initiated notices for store closures, listing 497 locations set to close nationwide as of September 11.
Also read: Walmart’s Fine Print: Customer Shocked by Secret Shopper Surveillance
Channel Control Merchants’ Downfall
Lastly, discount retailer Channel Control Merchants and its 17 affiliates have filed for Chapter 11 bankruptcy, planning to wind down operations of their 68 Dirt Cheap, Treasure Hunt, and Dirt Cheap Building Supplies stores across eight Southern states. The Hattiesburg, Mississippi-based debtor cited multiple issues contributing to its financial distress, including problems with its foundational supplier Target Corp, shifts in consumer shopping preferences, changes in spending habits, burdensome lease agreements, and ongoing effects from the pandemic.
The company’s line of credit expired on July 19, 2024, and it could not secure additional liquidity, according to a statement from Jeff Martin, the debtor’s chief restructuring officer. Without additional funding, the company determined it could only operate through the end of 2024.
Financial Situation and Future Plans
In its bankruptcy filing in the U.S. Bankruptcy Court for the District of Delaware, Channel Control Merchants listed assets and liabilities between $100 million and $500 million, including approximately $32 million in unsecured debt. Its largest unsecured creditors include Target Corp., owed $15.6 million, and Amazon.com, owed $5.8 million.
Founded in 1954, Channel Control Merchants was acquired in May 2023 by a group of investors, including Hilco Global and Behrens Investment Group. The company primarily operates in the South, selling secondary-market merchandise such as excess inventory and customer returns from major retailers. It also sells products through wholesale channels to other off-price retailers and e-tailers, offering a diverse range of items, including apparel, electronics, furniture, and health and beauty products.
