The major retailer’s stocks fall after the report that it may file for bankruptcy

Major retail chains had a tough year in 2023 as several big names filed for bankruptcy, including Rite Aid, Bed Bath & Beyond, Party City and Tuesday Morning.

Party City successfully emerged from bankruptcy in October 2023, just in time for Halloween, to continue as a going concern. Rite Aid is very close to emerging from bankruptcy after getting court approval of its reorganization plan.

Related: Another popular ice cream brand files for Chapter 11 bankruptcy

Bed Bath & Beyond and Tuesday Morning weren’t so lucky, as both retailers liquidated their stores in 2023. But Overstock.com acquired the Bed Bath & Beyond brand and intellectual property, merged the companies as Beyond, and now operates online on Bedbathandbeyond.com.

Large retail chains also filed for Chapter 11 bankruptcy in 2024. Fabric and craft store Joann’s filed for Chapter 11 in March, and teen retailer Rue 21 filed bankruptcy and was liquidated in May 2024. Discount retail chain 99 Cents only filed in April. Chapter 11 bankruptcy and liquidation as well.

Mall retailer Express filed for Chapter 11 bankruptcy in May and survived after closing about 95 stores, and Home Depot rival LL Flooring on Aug. 11 filed for Chapter 11 , requesting the sale of its assets.

Related: Struggling rival Home Depot files for Chapter 11 bankruptcy

Finally, discount home goods retailer Big Lots (GREAT) is considering a possible bankruptcy filing after years of declining sales, people familiar with the company’s plans told Bloomberg.

Big Lots may soon file for Chapter 11 bankruptcy.

Image source: Shutterstock

Large lots seek investors to avoid bankruptcy

Big Lots is also looking for investors to pump capital into the company to avoid filing for Chapter 11 bankruptcy, a person familiar with the situation said. Earlier this year, the retail chain secured a loan to address its cash crunch.

More bankruptcy stories:

• The famous Italian restaurant chain files for Chapter 11 bankruptcy
• A large shipping company files for Chapter 11 bankruptcy to liquidate it
• Luxury clothing brand files for Chapter 11 bankruptcy

Talk of a possible Chapter 11 filing is likely more than a rumor, as the company’s board on Aug. 12 approved one-time cash retention awards totaling $5.24 million to four top executives , according to a Securities and Exchange Commission Form 8-K. . Offering retention bonuses is a common practice before a company files for bankruptcy.

One-time bonuses included $3.15 million for CEO Bruce K. Thorn, $969,938 for Chief Financial Officer Jonathan A. Ramsden and $561,068 each for Chief Legal and Governance Officer Ronald A. Robins Jr. and Chief Human Relations Officer Michael A. Schlonsky.

Whenever credible rumors begin to circulate that a public company might file for bankruptcy, you can bet the stock will start to fall.

And a drop in stocks due to bankruptcy rumors can lead to a trading halt.

That’s what happened to coworking space provider WeWork in November 2023, after the Wall Street Journal reported that the company planned to file for Chapter 11 bankruptcy.

WeWork shares fell 66% from $2.52 to a low of 82 cents, including a 46% drop after the Journal report, according to Forbes. WeWork filed for Chapter 11 bankruptcy on November 6, 2023.

In the Big Lots situation, trading in the company’s stock was not halted, but shares on Aug. 28 fell about 14 percent in after-hours trading to 80 cents at last check after Bloomberg reported the company planned to file for bankruptcy. The stock recovered somewhat after falling about 25 percent in earlier after-hours trading.

Related: Veteran fund manager sees world of pain coming for stocks