Big Lots is considering bankruptcy amid sales decline and store closures.

Wall Street is raising significant concerns about the retailer's financial health and its ability to continue operations without filing for bankruptcy. The impact of elevated inflation on consumer spending and operational costs has severely affected the Ohio-based home goods retailer, potentially forcing the retailer to close its doors.

Key data points to consider when retailers approach a potential bankruptcy filing:

1. Credit Inquiries: We see a surge in Big Lots credit inquiries since May 2024, indicating that Big Lots is actively seeking additional funding. This aligns with reports of the retailer exploring options to avoid filing for bankruptcy, highlighting its struggle to maintain operations in 2024.
2. Decreasing Spend: This pattern corroborates reports of declining sales at Big Lots. The retailer's reduced spending can rapidly lead to inventory shortages and further impact its ability to continue normal operations.
3. Increased UCC Filings: The rise in UCC filings in July 2024 is alarming. It suggests that Big Lots lenders are seeking to secure loans against properties and assets. This reduces the pool of unencumbered assets, which could affect unsecured creditors if Big Lots were to close stores or file for bankruptcy.
4. Store Closures: Reports of Big Lots closing hundreds of locations in 2024 further emphasize the retailer's struggle to maintain profitability amid inflation.
5. Inflation Impact: The persistent inflationary environment of 2024 has hit retailers like Big Lots particularly hard. Rising costs and reduced consumer spending power have created a challenging landscape for discount retailers.
6. Flat Days Beyond Terms (DBT): While Big Lots is managing to meet immediate payment obligations, they show flat DBT upon decreasing outstanding credit. This signals that Big Lots continues to pay vendors on time, but the decreasing outstanding credit amounts signal potential decreasing spend and / or ability to utilize credit terms.

As a credit manager, these factors necessitate immediate action:

1. Urgent Credit Review: Conduct an immediate review of any credit extended to Big Lots, considering the increased likelihood of the retailer filing for bankruptcy in 2024.
2. Reduce Exposure: Aggressively reduce credit exposure to mitigate risks associated with Big Lots' potential inability to continue operations.
3. Secured Credit: If continuing business with Big Lots, push for secured credit arrangements, given the increase in UCC filings and the possibility of additional store closures.
4. Payment Terms: Tighten payment terms or require cash in advance for new transactions.
5. Continuous Monitoring: Implement frequent monitoring of Big Lots' financial indicators, public statements about store closures, and all new data that signal financial distress. Big Lots is part of an overall pattern across retail distress, so it's important to monitor risk across all customers and prioritize where to focus.

In conclusion, the combination of public news, Credit Pulse data, and the broader economic context of inflation in 2024 paints a dire picture for Big Lots. The retailer's ability to continue operations without filing for bankruptcy appears increasingly uncertain. Credit managers must remain vigilant and take proactive measures to protect their interests as Big Lots navigates this challenging period.

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