The home sector remains distressed, with Big Lots and LL Flooring the next companies to keep on one’s watch list.
Cash Crunch Sees Home Retailer Conn's Shutting Down Operations
The off-price home goods retailer and the flooring specialist are both exploring options for cash infusions to stabilize liquidity needs.
The distress of the two firms comes on the heels of Conn’s Inc.’s Chapter 11 filing in a Texas bankruptcy court on Tuesday to pursue an orderly wind-down of operations. The company on Thursday began liquidating the inventories at its retail banners, which includes Conn’s HomePlus and the W.S. Badcock banner, which was acquired this past December.
Big Lots Inc.
Big Lots is expected to close nearly 150 store locations across 28 states, roughly four times more than the 35 to 40 stores it said it expected to close in 2024 in a first quarter report filed in June with the Securities and Exchange Commission.
The regulatory filing said the retailer has incurred net losses in 2022, 2023 and the first quarter of 2024. It also said that it might be unable to comply with a covenant requirement, which “raises substantial doubt about the company’s ability to continue as a going concern.” In addition, Big Lots is reviewing options to improve its available liquidity, including raising additional capital. Bloomberg first reported that the chain has reached out to prospective investors on the possibility of a new loan backed by assets, such as the company’s leases.
The new loan is in addition to the $200 million term loan facility Big Lots inked with Gordon Brothers Capital this past April. Big Lots at the time described the Gordon Brothers facility as “incremental” to the borrowing capacity within its existing $900 million asset-based revolving loan facility.
The company did not respond to a request for comment by press time.
Three years ago, the home decor off-pricer tried to broaden its appeal by carrying more branded and private-label fashion merchandise. Then consumers shifted their spending patterns. The retailer, which has a heavy focus on furniture, saw its low-income customers get impacted by post-COVID inflationary pressures and a limited capacity for higher-priced discretionary purchases.
Home retailers who sell furniture also faced supply chain issues, as well as increased shipping costs for imports and deliveries to consumers. Big Lots was no exception.
Big Lots even tried to steal away customers from bankrupt Bed Bath & Beyond by honoring its coupons after the big box retailer said it would stop accepting them as its started store shutdowns. But even that couldn’t help the off-pricer’s declining sales. The Street last fall first reported on Big Lots as a possible bankruptcy risk, citing data from Credit Risk Monitor.
Home Retailer Conn's To Close 71 Doors Amid Chapter 11 Speculation
In an effort to cut costs, Big Lots last year closed four distribution centers. The centers were in McDonough, Ga.; Bethel, Penn.; Lacey, Wash., and Merrillville, Ind. It was also looking at other options, such as sale-and-leaseback of certain assets.
LL Flooring
The company in August 2023 said it was exploring strategic options in connection with “expressions of interest” by unnamed parties seeking to acquire the company.
And while it has had several non-binding offers, nothing has materialized into a sale of the company.
A Bloomberg story said the company is considering a Chapter 11 bankruptcy filing and that it is in talks with lenders to modify an existing credit agreement. LL Flooring did not respond to a request for comment by press time.
The retailer was embroiled in a proxy fight with its former CEO and founder Tom Sullivan. He submitted one of the non-binding offers, with plans to merge the company with a separate business he founded called Cabinets to Go, which is a division of F9 Brands. At the annual meeting of shareholders on July 10, Sullivan was one of three elected to serve as board directors. Sullivan left the company at the end of 2016, but remains the landlord of several store locations.
The future of the flooring retailer remains unclear.
LL Flooring ended the first quarter on March 31 with 435 locations in operations. It was once known as Lumber Liquidators. The company rebranded itself in 2020, one year after paying $33 million to settle allegedly false public statements regarding formaldehyde levels in laminate flooring.
Second-Half Issues: Freight Congestion, Retail Inventories & Consumers
Most Popular
Comments / 0