Furnishing and retailer Big Lots Inc.'s (OTC:BIGGQ) Chapter 11 bankruptcy filing in September and impending store closures could benefit a close competitor, a Wall Street analyst says.
What Happened: On Sept. 9, Big Lots filed for Chapter 11 and announced a subsequent sale of its assets to Nexus Capital Management LP. The company's stock was subsequently delisted from the New York Stock Exchange.
Its third-quarter financial report revealed a company struggling with declining sales, eroding margins and a continual bleeding of cash.
On Thursday, the Columbus, Ohio-based company said its sale to Nexus Capital fell through, noting it "continues to work toward completing an alternative going concern transaction with Nexus or another party."
CEO and President Bruce Thorn announced a going-out-of-business sale.
"We all have worked extremely hard and have taken every step to complete a going concern sale," Thorn said. "While we remain hopeful that we can close an alternative going concern transaction, in order to protect the value of the Big Lots estate, we have made the difficult decision to begin the GOB process."
The company will then presumably close its remaining 960 locations across Ohio, North Carolina, Texas, Florida and other states.
A Competitor Benefits: JPMorgan analyst Matthew R. Boss reiterated an Overweight rating for competitor Ollie's Bargain Outlet Holdings Inc (NASDAQ:OLLI) following the Thursday announcement.
Boss foresees around 840 Big Lots store closures before early January. The analyst says the bankruptcy could lead to a "7%-9% market share capture opportunity" for Ollie's due to its similar location exposure in the Midwest and on the East Coast.
Boss notes that Ollie's gained 7% to 8% market share in its toys and entertainment department from Toys "R" Us following its bankruptcy in 2018. It also gained 9% market share from Bed Bath and Beyond's domestics department following its 2023 bankruptcy.
Ollie's Bargain stock has risen nearly 30% since the Big Lots bankruptcy news.
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