The US retail industry suddenly reported negative news.
On August 29th, the stock price of well-known American retailer Big Lots suddenly crashed after the US stock market closed, plummeting by over 30% at one point. There are market reports that after experiencing a decline in sales, BiLotto is considering filing for bankruptcy. It is reported that BiLotto is a well-established American retailer founded in 1967. As of June this year, the company operates approximately 1400 stores across the United States.
Analysts warn that the possibility of bankruptcy in the lottery could have an impact on the retail industry, highlighting the vulnerability of companies that rely on discretionary spending in the high interest rate environment in the United States. Investors should be wary of further declines in retail stocks as market confidence may weaken.
The lottery may be a microcosm of the bankruptcy wave in the US retail industry. Debtwire's global head of legal and restructuring, Sarah Foss, stated that discount chains like Lotto have faced a very challenging retail environment since the beginning of this year, with multiple retailers in the United States initiating Chapter 11 bankruptcy protection proceedings.
Bankruptcy rumor raid
On August 29th, after the US stock market closed, the stock price of well-known American retailer, Lotto, suddenly plummeted, plummeting by over 30% at one point. Prior to this, the cumulative decline in the stock price of BiLotto within the year had exceeded 88%.
There are market reports that after experiencing a decline in sales, BiLotto is considering filing for bankruptcy. Insiders say that the company is still seeking potential external investors to avoid bankruptcy. The bankruptcy plan has not yet made a final decision.
It is reported that BiLotto is a well-established American retailer, founded in 1967 and headquartered in Ohio. It mainly provides branded clearance products and discounted items, offering consumers a unique shopping experience. There is a wide variety of products under its umbrella, including consumables, seasonal goods, furniture, household utensils, toys, and gifts. As of June this year, BiLotto operates approximately 1400 stores across the United States.
As of now, there has been no response from the lottery company regarding the bankruptcy plan.
Earlier this year, BiLotto received a loan that helped the company overcome its liquidity crisis. In recent weeks, the company has been seeking additional financing.
On August 12th, BiLotto approved the distribution of a one-time retention bonus to executives, with a total amount exceeding $5 million. This type of bonus is usually issued before the company's restructuring, especially in the case of Chapter 11 bankruptcy law, with the aim of preventing key management from changing jobs during the restructuring process.
The retention agreement stipulates that each executive must repay this money if they voluntarily resign within 12 months after signing the agreement, unless it is a constructive termination or termination due to company reasons.
According to the previously released financial report of BiLotto, all performance indicators for the first quarter of the 2024 fiscal year were lower than expected financial performance, with net sales decreasing by 10.2% year-on-year to $1 billion.
Among them, the quarterly loss announced by BiLotto exceeded expectations, directly raising concerns among investors about its ability to continue operating and indicating that it may not be able to fulfill its credit and loan obligations in the near future.
Despite having a net working capital of $289 million and cash and cash equivalents of $44 million as of the end of the first quarter, the situation remains very dire.
We were unable to achieve our sales targets primarily due to our core customers continuing to reduce their expenses, especially for high priced non essential items. The consumer environment was weak in the first quarter, with consumer confidence and sentiment declining due to concerns about inflation, unemployment, and interest rates, "said Bruce Thorn, President and CEO of ByteDance
The data shows that currently, the short position of BiLotto accounts for 24%, and the company plans to disclose its second quarter performance on September 6th Eastern Time.
Analysts warn that the possibility of bankruptcy in the lottery could have an impact on the retail industry, highlighting the vulnerability of companies that rely on discretionary spending in the high interest rate environment in the United States. Investors should be wary of further declines in retail stocks as market confidence may weaken.
Bankruptcy wave
The lottery, perhaps a microcosm of the US retail industry, is experiencing a fierce wave of bankruptcies.
Debtwire's global head of legal and restructuring, Sarah Foss, commented, "Discount chains like Lotto have faced a very challenging retail environment this year, with multiple retailers in the United States initiating Chapter 11 bankruptcy protection proceedings
Among them, Conn's HomePlus is a furniture and electronics retailer with a history of 134 years, mainly with branches in the southern United States. The company has filed for bankruptcy. The company's sales have been declining, with assets and liabilities of at least $1 billion each.
LL Flooring, an American flooring company, also filed for bankruptcy protection this month and will close 94 stores across the United States. After applying for bankruptcy protection, LL Flooring can seek to sell its 30-year old business and is currently actively negotiating with multiple bidders. Due to inflation and budget constraints, the demand for disposable large items such as furniture has decreased, making it increasingly difficult for American furniture retailers to operate.
Recently, American furniture retailer Cohen also entered into bankruptcy liquidation proceedings. According to US media reports, Cohen is currently launching clearance promotions at over 550 retail outlets as part of the company's liquidation process.
Under the wave of bankruptcies, American retailers have attributed the reasons to high inflation and rising interest rates, which have suppressed consumer spending in the United States, leading to setbacks and bankruptcies in the retail industry.
Another retailer in this field, Wayfair, also stated in its latest report that home goods consumers are facing ongoing pressure.
Wayfair's second quarter financial report showed a 1.7% decrease in total revenue, with a 2% decline in US revenue. Wayfair's order delivery volume also decreased by 2.9%, and the number of repeat customer orders also decreased by 2.4%.
Niraj Shah, co-founder, co chairman, and CEO of Wayfair, stated in the financial report, "Consumers remain cautious in their home consumption. Our credit card data indicates that the current category adjustment reflects the decline experienced by the home decor industry from peak to trough during the financial crisis
At the beginning of this year, Wayfair announced the layoff of 1650 employees, accounting for 13% of its global workforce, which could save the company approximately $280 million annually.
According to analysis, one of the reasons why the US retail industry is facing difficulties is that American consumers are becoming increasingly cautious in their spending, and more and more consumers are willing to buy cheap second-hand goods. The PYMNTS intelligence report "Consumers shop at second-hand stores as frequently as other retail stores" shows that many shoppers are starting to purchase household items and other high priced goods through second-hand channels.
The report found that 43% of consumers who made retail purchases through second-hand channels last year purchased furniture through these channels. In the "transitional millennial generation" and "millennial generation", this proportion has risen to 38% and 34% respectively.