Big Lots (NYSE: BIG) stock price continued its freefall this week as concerns rose about its future. The shares collapsed by more than 30% in the pre-market session, moving to the key support at $4. This means that the stock has lost more than half of its value this year and has dropped by 93% from its all-time high.
Bankruptcy risks riseBig Lots, a popular discount retailer, is facing elevated bankruptcy risks as its losses mount and its debt remains substantial. The current phase of decline happened after it was reported that the company was in talks with bankers about raising capital in the form of debt or equity.
Big Lots has come under pressure in the past few months as its sales slowed and the cost of servicing its debt jumped. It sits on over $3.3 billion in liabilities, made up of $1.6 billion in leases and $533 million in long-term debt.
At the same time, Big Lots’ business has not been doing well. Its net losses in the past five straight quarters stood at over $550 million. Worse, the ongoing high-interest rate environment has seen the cost to service its debt jump to over $11.3 million per quarter.
All this is happening at a time when the company’s revenue growth has been disappointing. The revenue figure published in October stood at $1.02 billion down from $1.2 billion in the same period in 2022. Analysts believe that the company’s revenue that will come out on March 1st will show that its revenue dropped to $1.43 billion.
Big Lots, a company that has over 1,400 stores in 47 US states, has come under pressure as its balance sheet has deteriorated. Data by Simply Wall St shows that its net debt to equity ratio has jumped to 157% while its operating cash flow remains in the negative area. It has an Altman Z score figure of 2.2. Therefore, there is a likelihood that the company will go through reorganisation if it is not able to raise additional capital.
Big Lots stock price forecast
The weekly chart shows that the BIG share price continued its downward trend this week. It has fallen from a high of $66 to less than $4. Most recently, the company plunged below the important support level at $8.84, its lowest swing in March 2020. It has also remained below all moving averages, signaling that bears are still in control.
Therefore, the outlook for the shares is still bearish, with the next point to watch being at $3. However, what is clear is that the stock will be highly volatile in the coming weeks.
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