retail bankruptcies and restructuring in 2023-2024
Prominent retail establishments encountered substantial difficulties in 2023, with numerous renowned companies declaring bankruptcy, such as Rite Aid, Bed Bath & Beyond, Party City, and Tuesday Morning.
Party City successfully exited bankruptcy in October 2023, right before Halloween, enabling it to carry on with its business. Rite Aid is also on the verge of coming out of bankruptcy after obtaining court endorsement for its reorganization strategy.
Yet, not every retailer experienced a similar fate. Bed Bath & Beyond and Tuesday Morning had to wind down their operations in 2023. In a calculated approach, Overstock.com took over Bed Bath & Beyond’s branding and intellectual property, amalgamating the entities under the title “Beyond,” which now functions online at Bedbathandbeyond.com.
The wave of retail bankruptcies persisted into 2024. Joann, a fabric and crafts retailer, sought Chapter 11 protection in March, followed by Rue 21, a teen fashion retailer, which entered bankruptcy and shut down in May 2024. Discount chain 99 Cents Only also initiated Chapter 11 proceedings in April, subsequently closing down.
In May, Express, a clothing retailer based in malls, filed for Chapter 11 but was able to endure by shutting approximately 95 locations. LL Flooring, a competitor to Home Depot, filed for Chapter 11 on August 11, 2024, looking to sell its assets.
big lots’ potential bankruptcy and executive retention bonuses
Another retailer that may face bankruptcy is the discount home goods brand Big Lots. Reports indicate the company is contemplating a Chapter 11 filing after years of decreasing sales. Earlier this year, Big Lots acquired a loan to resolve its liquidity challenges and is actively seeking investors to provide capital to evade bankruptcy.
The likelihood of a Chapter 11 filing appears to be growing, as Big Lots’ board approved one-time cash retention bonuses amounting to $2.24 million for four senior executives on August 12, 2024. Such retention incentives are frequently awarded prior to a bankruptcy filing.
The bonuses comprised $1.15 million for CEO Bruce K. Thorn, $529,938 for Chief Financial and Administrative Officer Jonathan A. Ramsden, and $201,068 each for Chief Legal and Governance Officer Ronald A. Robins Jr. and Chief Human Relations Officer Michael A. Schlonsky.
When credible reports about a public company potentially planning a bankruptcy emerge, it often causes a significant drop in the company’s stock value. This was evident with WeWork in November 2023, when the Wall Street Journal announced that the firm was preparing for a Chapter 11 filing. WeWork’s stocks fell dramatically by 66%, plummeting from $1.52 to a low of 82 cents, including a 46% decline following the Journal’s revelation. WeWork eventually filed for Chapter 11 bankruptcy on November 6, 2023.
In Big Lots’ situation, trading of the company’s shares has not been suspended, but the stock dropped around 14% in after-hours trading on August 28, 2024, to 80 cents after Bloomberg indicated that the retailer intended to file for bankruptcy. The stock had partially recuperated after an earlier decline of approximately 25% in preceding after-hours transactions.
