It’s been tough for consumers lately. Inflation has surged, crimping budgets, and recently, news of job losses has become common, further pressuring them.
The Consumer Price Index inflation measure showed that prices rose 3% year-over-year in January, up from 2.4% in September. Meanwhile, unemployment has climbed to 4% from a low of 3.5% in 2023.
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As a result, more shoppers are taking a closer look at their spending and cutting corners where they can.
The shift in spending has been bad news for retail store chains that focus primarily on discretionary purchases, like clothing and electronics. However, they’re far from the only retailers that have taken it on the chin.
The cash crunch has also hit some discount retail stores who theoretically should benefit from cost-consciousness. As a result, that retail segment is much more hit-and-miss, with big winners and losers.
Inflation has taken a toll on the retail industry, forcing some big chains into bankruptcy.
Albany Times Union/Hearst Newspapers/Getty Images
The economy thrusts Big Lots into bankruptcy
One of the losers in this past year’s shift in consumer behavior is Big Lots.
The well-known discount retail store chain operated around 900 stores as recently as last fall. However, its store count has fallen sharply after it filed for bankruptcy protection on Sept. 9.
Related: Discount retailer closing more stores after Chapter 11 bankruptcy
At the time, Big Lots said it was filing for bankruptcy because “Like many other retail businesses, the company has been adversely affected by recent macroeconomic factors such as high inflation and interest rates that are beyond its control.”
Management said it suffered because it relied heavily on sales of home and seasonal products, which were heavily reliant upon discretionary spending trends.
The company has tried to make moves to stay in business, but its future is anything but certain.
Despite cost-saving moves like selling real estate and leasing it back, its footprint will shrink to between 200 to 400 stores after a sale to Gordon Brothers Retail Partners, allowing Variety Wholesalers to operate them under the Big Lots brand.
What will happen to its other stores?
Some will shutter forever, while others will find new life under a rival’s banner.
Ollie’s Bargain Outlets inks deal with Big Lots to open more stores
Ollie’s Bargain Outlets (OLLI) isn’t suffering Big Lots’ fate. Unlike Big Lots, Ollie’s has created a destination vibe similar to Trader Joe’s, with old-timey advertising encouraging a treasure hunt mentality among those searching for “Good Stuff Cheap.”
In December, Ollie’s said its fiscal third-quarter revenue grew nearly 8% year-over-year to $517 million. Unlike Big Lots, Ollie’s is nicely profitable, given earnings grew nearly 14% to 58 cents in the fourth quarter.
Related: Iconic bankrupt retailer closes all 800 stores in liquidation
In fact, it could be a prime beneficiary as the company looks to expand into new markets.
The retailer, which sells discount and close-out items in 568 stores in 31 states, boasts a loyal following known as Ollie’s Army. In the most recently reported quarter, Ollie’s Army membership totaled 14.8 million people, up 8% from the previous year, and that Army accounted for over 80% of total sales.
Ollie’s Army is about to get a lot bigger.
On Feb. 28, Ollie’s Bargain Outlets revealed it had acquired Big Lots store leases at 40 locations. The move follows a previous agreement that secured Ollie’s 23 Big Lots leases, bringing its total lease haul to 63 stores.
More closings:
Popular retail chain to close unprofitable store locationsBankrupt retail chain unloads store leases, key assetPopular discount retailer files bankruptcy, closes all stores
“Everything about these stores lines up well with our business and growth strategy. These locations are the right size, come with favorable lease terms, are located in existing and adjacent trade areas, and have long serviced value-conscious consumers,” said Ollie’s Bargain Outlets CEO Eric van der Valk.
The move accelerates Ollie’s existing store expansion plans, bringing the total number of new stores it plans to open this year to “approximately 75” locations. For perspective, Ollie’s said it opened 21 net stores over the 12 months ending in November.
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