Big Lots files for bankruptcy

New York (CNN) — Big Lots, the beleaguered discount retailer that previously warned it had “substantial doubt” about its survival, has filed for bankruptcy.

As part of its Chapter 11 filing, the retailer announced that private equity firm Nexus Capital Management is acquiring “substantially all” of Big Lots stores and business operations. During the process, its locations and website will remain open for shopping.

“The actions we are taking today will enable us to move forward with new owners who believe in our business and provide financial stability, while we optimize our operational footprint, accelerate improvement in our performance, and deliver on our promise to be the leader in extreme value,” said Big Lots CEO Bruce Thorn in a press release.

Big Lots blamed several economic factors for its bankruptcy, including high inflation and interest rates. That has led customers to change their purchasing behavior. They’re seeking out value – but not necessarily lower costs. That’s why dollar stores have been struggling while sales at Walmart and Amazon have been booming. It’s also why McDonald’s has been struggling while casual chains like Applebee’s have been growing.

“The prevailing economic trends have been particularly challenging to Big Lots, as its core customers curbed their discretionary spending on the home and seasonal product categories that represent a significant portion of the company’s revenue,” it explained.

More store closures could be coming, too. Big Lots is in the process of closing roughly 300 of its 1,400 store across the United States. No additional closures were announced Monday, but Big Lots warned it will “need to close certain locations to ensure that our business operates efficiently and we can continue serving our customers.”

The 57-year-old company has secured $707.5 million in fresh financing to keep operating and to pay employees and vendors. Nexus was named the “stalking horse bidder” with its acquisition expected to close later this year, unless there are better offers.

But it’s “unlikely that another bidder will emerge” because of the short sales timeline, according to Sarah Foss, global head of legal and restructuring for Debtwire, a publication focused on leverage markets.

Chapter 11 is useful for Big Lots because “it gives a debtor leverage in negotiations and allows a company to renegotiate and reject burdensome leases and contracts, which are often a major financial strain on a distressed company in this sector,” Foss told CNN.

Big Lots joins a growing list of well-known retailers hitting financial turbulence as customers cut back spending on non-essential items. Last week, LL Flooring announced that it couldn’t find a buyer and is shutting down after more than three decades in business.