Big Lots warns of future woes in filing with SEC

2024.07.09

COLUMBUS, Ohio — In a 10-Q report filed with the Securities and Exchange Commission last month, retailer Big Lots called into question its ability to continue under certain circumstances.

In the filing, dated June 13, the Columbus, Ohio-based discounter noted that it has incurred net losses and used cash in operating activities in 2022, 2023 and the first quarter of 2024 and that it is currently in compliance with its debt agreements but expects to experience further operating losses and expects to experience difficulty remaining in compliance with those covenants.

In the filing, it wrote that its aggregate available borrowings under the 2022 Credit Agreement and Term Loan Facility are $213.9 million, subject to certain borrowing base limitations. As such, it noted that management has implemented plans to trim costs, improve sales and enhance financial flexibility and liquidity.

“However, based on our current cash and liquidity projections, and uncertainties with respect to the mitigating effect of management’s plans, the Company has concluded there is a significant likelihood that it will be unable to comply with the Excess Availability Covenant under the 2022 Credit Agreement and the Term Loan Facility within the next 12 months, which raises substantial doubt about the Company’s ability to continue as a going concern,” the company wrote in the filing.

“Failure to comply with the Excess Availability Covenant would result in an event of default which could result in an acceleration of our obligations under the Term Loan Facility and the 2022 Credit Agreement. We can provide no assurance that the lender parties under the Term Loan Facility or the 2022 Credit Agreement would waive the Company’s failure to comply with the Excess Availability Covenant.”

Among the company’s efforts to rein in costs, it is restructuring its global sourcing operations and bringing its longtime, third-party agent’s sourcing team internal, which officials said would allow it to go deeper on deals and strengthen the company’s bottom line.

In April, Big Lots announced that it signed a multi-million-dollar loan facility through an affiliate of Gordon Brothers Capital, which boosted its borrowing capacity by up to $200 million. At the same time, it noted that it expects to go after more “extreme bargains” while also maintaining a presence in higher price point items, such as its Broyhill branded home products.

The sudden closure of United Furniture Inds. in late 2022 hurt furniture sales for the company in 2023, as it created a shortage of available product, as it was Big Lots’ largest furniture vendor at the time it closed. However, the company noted that in-stock Broyhill bounced back to normal levels and furniture sales improved by the second half of the year.

For the most recent quarter, which ended May 4, Big Lots’ net sales totaled $1.009 billion, a 10.2% decline compared with the $1.124 billion it generated in the same quarter in 2023. Comparable store sales were off the 2023 mark by 9.9%. Its net loss for the period was $205 million, or $6.99 per diluted share, compared with a loss of $206.1 million, or $7.10 per diluted share, in the first quarter of 2023.