Financial Rescue Planned by Gordon Brothers and Variety Wholesalers for Certain Big Lots Outlets
Gordon Brothers Retail Partners has provided a rescue for struggling closeout retailer Big Lots, after a planned acquisition deal with Nexus Capital Management failed to materialize.
Prior to Gordon Brothers' intervention, Big Lots had been forced to shut down all 900 of its stores. However, thanks to this new arrangement, between 200 and 400 stores will now be spared from closure.
Neil Saunders, managing director of GlobalData Retail, celebrated the news on LinkedIn, stating, "Good news for retail jobs this morning. Big Lots, which filed for bankruptcy in September, has struck a deal with Gordon Brothers Retail Partners to keep hundreds of stores open and save thousands of jobs."
Gordon Brothers, which was overseeing Big Lots' going-out-of-business sale, will now acquire all of the company's assets, including stores, distribution centers, and intellectual property. These assets will then be sold on to other retailers and companies.
Variety Wholesalers has already been identified as the first buyer, agreeing to take on between 200 and 400 Big Lots stores, along with two distribution centers. These stores will continue to operate under the Big Lots brand.
Big Lots' president and CEO expressed his joy at the agreement, stating, "This sale agreement and transfer present the best opportunity to preserve jobs, maximize value for the estate, and ensure the continuity of the Big Lots brand."
The deal is subject to approval from the bankruptcy court and other customary closing conditions.
Variety Wholesalers
Currently, Variety operates around 400 stores in the Southeast and Mid-Atlantic regions. It is best known for its Roses Discount Stores and Roses Express stores, but also operates Bargain Town, Super 10, Bill’s Dollar Stores, and Maxway.
It's unclear which stores will remain open, but Variety has pledged to keep current employees at the stores that do, as well as bring over some essential corporate staff to manage its Big Lots operations. The number of employees who will transfer to Variety is yet to be determined.
Given Variety's bargain positioning, it seems like a good fit for the Big Lots brand.
Rick Edwards, head of North America retail at Gordon Brothers, expressed his satisfaction with the deal, stating, "We are pleased to reach this strategic agreement with Big Lots and partner with Variety Wholesalers to achieve a path forward that allows Big Lots to continue to serve customers with extreme bargains and an outstanding shopping experience."
Edwards' company is also handling the closeout sale for 700 Party City locations.
With this news, Variety's president and CEO, Lisa Seigies, has effectively doubled her area of control. She has been with the company for six years, rising through the ranks after serving as the company's chief merchandising officer.
She has previously worked for Federated, now Macy's, and Martha Stewart Living Omnimedia, as well as Ross Stores and Stage Stores.
Big Lots' Remaining Assets
In its most recent first quarter earnings report, ending May 4, Big Lots reported a 10% drop in sales to $1 billion and a net loss of $205 million. It closed 500 stores in association with its September bankruptcy, resulting in a 14% drop in sales to $4.7 billion for the year.
At the end of the first quarter, it held $950 million in inventory, $4 million in cash, and $574 million in long-term debt.
Instead of reporting earnings for the second quarter, it opted to file for bankruptcy. At that time, it listed assets and liabilities in the range of $1 billion to $10 billion and named between 5,001 to 10,000 creditors owed, according to Seeking Alpha.
It remains to be seen if Gordon Brothers can secure additional buyers to save more of the Big Lots brand, but they have made a strong start.
As GlobalData's Saunders concluded, "This at least gives Big Lots a chance at survival in some form. Although a lot of changes will be needed to optimize a proposition that, frankly, was well below par before bankruptcy."
Following the failure of the acquisition deal with Nexus Capital Management, Gordon Brothers Retail Partners acquired Big Lots' assets, including stores, distribution centers, and intellectual property. Variety Wholesalers, known for its Roses Discount Stores and Bargain Town, has agreed to purchase 200 to 400 Big Lots stores and two distribution centers, allowing these stores to continue operating under the Big Lots brand.
Given Variety Wholesalers' acquisition of Big Lots stores, it is expected to double its area of control, potentially impacting a significant number of employees. This deal also allows Big Lots to preserve jobs and continue serving customers with extreme bargains, as expressed by Rick Edwards, head of North America retail at Gordon Brothers.
