Big Lots, a discount retail chain, recently announced the closure of over 50 stores in California due to a decline in customer spending and economic challenges. The company’s website indicates that 54 stores in the state will be affected, although specific closing dates have not been provided. This decision comes as Big Lots plans to open three new stores across the country while simultaneously closing 35 to 40 others.
In a filing with the U.S. Securities and Exchange Commission (SEC) in June, Big Lots attributed these closures to “macroeconomic challenges” within the U.S. economy, including inflation, which have negatively impacted its customers’ buying power. The company also expressed concerns about its financial stability, stating that it has “substantial doubts” about its ability to continue operations based on its current cash and liquidity projections. Additionally, Big Lots acknowledged the possibility that it may not meet the terms of a credit agreement set to expire in 2022.
Big Lots has experienced net losses and cash usage in its operating activities throughout 2022, 2023, and the first quarter of 2024. The company’s financial report for the first quarter of fiscal 2024 revealed a 10.2 percent decrease in net sales compared to the same period the previous year, amounting to $1.009 billion. Furthermore, Big Lots reported a net loss of $205 million, equivalent to $6.99 per share, for the first quarter of fiscal 2024.
Big Lots CEO, Bruce Thorn, attributed the company’s failure to meet sales targets to a decline in consumer spending, particularly on high-ticket discretionary items. However, Thorn expressed confidence in the future of the business and its ongoing transformation efforts. He stated that the current financial performance does not accurately reflect the stronger business model that Big Lots has developed through its five key actions. Thorn expects the positive impact of these efforts to become more evident in the latter half of the year.
The closure of over 50 Big Lots stores in California is a significant development that underscores the challenges faced by discount retailers amidst economic uncertainties. The impact of inflation on consumer spending power has been a widespread concern, and Big Lots is not exempt from its effects. With the closure of these stores, the company aims to streamline its operations and improve its overall financial stability.
Big Lots’ decision to simultaneously open new stores while closing others suggests a strategic realignment to focus on more profitable locations. By carefully evaluating market demands and consumer preferences, the company hopes to enhance its competitive position and regain financial stability.
While the closure of these stores is undoubtedly a setback for Big Lots, CEO Bruce Thorn remains optimistic about the future. He believes that the company’s ongoing efforts to transform its business model will yield positive results in the latter part of the year. As Big Lots continues to adapt and evolve, it will be interesting to see how it navigates the ever-changing retail landscape and positions itself for long-term success.
