Big Lots Collaborates with Advisory Firm to Optimize Operations in the Furniture Retail Sector

Big Lots Seeks Operational Help Amid Shrinking Revenue

Introduction

Furniture retailer Big Lots Stores Inc. is reportedly working with AlixPartners LLP, a leading global consulting firm, to address operational challenges and cut costs as the company grapples with shrinking revenue. The company has struggled with declining sales due to changing consumer buying habits, higher interest rates, inflationary pressures, and supply chain issues.

Financial Struggles and Cost-cutting Measures

Big Lots has experienced a significant decline in earnings, with comparable sales plummeting 18.2% in the first quarter of this year. To counter this decline, the company’s CEO, Bruce Thorn, announced plans to identify over $100 million in structural selling, general, and administrative expenses for 2023. Additionally, they aim to realize an additional $200 million in savings across gross margin and SG&A costs in 2024 with the assistance of an “external party.”

In an earnings call held in May, Big Lots refrained from providing full-year guidance due to “significant uncertainties.” This caution reflects the challenges the company faces in navigating an ever-changing retail landscape and the implications of ongoing economic conditions.

Supply Chain Disruptions and Vendor Woes

Big Lots not only struggles with declining sales but also faces the aftermath of the sudden closure of its largest vendor, United Furniture Industries Inc., in November. This closure disrupted the company’s supply chain and led to product shortages, further exacerbating the retailer’s challenges.

To address these issues, Big Lots has been implementing aggressive inventory management strategies and engaging in asset monetization efforts. They have also strengthened their liquidity position through the availability of their $900 million asset-based lending facility and a sale and leaseback deal with affiliates of Blue Owl Capital, which generated gross proceeds of $318 million.

Expertise from AlixPartners

AlixPartners LLP, the consulting firm now working with Big Lots, brings extensive expertise in advising businesses facing operational challenges. While no specific details have been disclosed about the nature of the advice or strategies being implemented, their involvement signals a commitment from Big Lots to find innovative solutions to navigate the changing retail landscape successfully.

Editorial: Navigating Turbulent Times in the Retail Sector

Significance of Operational Support

Big Lots’ decision to seek operational help from AlixPartners is indicative of the challenges facing the retail sector as a whole, particularly amid global economic uncertainty and evolving consumer preferences. This move suggests that companies must be proactive in addressing operational inefficiencies to remain competitive.

Impact of Changing Consumer Habits

The decline in Big Lots’ sales can be attributed, at least in part, to changing consumer habits. Higher interest rates and inflationary pressures have disproportionately affected lower-income consumers, who form a significant portion of Big Lots’ customer base. To thrive in the current retail environment, companies must adapt to changing consumer preferences and find innovative ways to attract and retain customers.

Supply Chain Resilience and Vendor Relationships

Big Lots’ struggles with supply chain disruptions and the closure of its largest vendor highlight the importance of building resilient supply chains and establishing strong relationships with vendors. Companies must proactively monitor their supply chains, diversify their vendor base, and foster effective communication to mitigate potential disruptions.

Advice to Big Lots and Retailers Alike

Embrace Operational Efficiency

Big Lots’ engagement with AlixPartners demonstrates the importance of embracing operational efficiency to mitigate financial challenges in the retail sector. Retailers should continually evaluate their operations, identify areas for improvement, and seek expert advice to optimize efficiency and drive long-term profitability.

Invest in Innovation

To thrive in the increasingly competitive retail landscape, companies must invest in innovation and adapt to evolving consumer preferences. They should explore emerging technologies, enhance their e-commerce capabilities, and create seamless omnichannel experiences. By embracing innovation, retailers can differentiate themselves and attract tech-savvy consumers.

Build Resilient Supply Chains

Supply chain disruptions can have severe consequences for retailers. It is crucial for companies to build resilient supply chains by diversifying vendors, maintaining strong relationships, and implementing effective risk management practices. Proactive monitoring and early intervention can help address potential disruptions and ensure a stable flow of inventory.

Conclusion

Big Lots’ collaboration with AlixPartners reflects the challenges faced by the retail sector in the current economic climate. To overcome these challenges, companies must prioritize operational efficiency, adapt to changing consumer habits, and build resilient supply chains. By embracing innovation and seeking expert guidance, retailers can position themselves for long-term success in an evolving retail landscape.