Dive Brief:
- Big Lots is grappling with furniture shortages following the abrupt closure of its largest supplier, according to its Q4 earning call.
- United Furniture Industries, the primary vendor for Big Lots’ Broyhill furniture brand, ceased operations in November “unexpectedly and without advanced notice,” CEO Bruce Thorn said in the call. As a result, the vendor did not complete shipments.
- The discount retailer is relying on other suppliers to mitigate the impact of United Furniture’s closure, Thorn said. Furniture makes up roughly half of Big Lots’ e-commerce sales, and shortages negatively impacted sales in Q4.
Dive Insight:
After United Furniture Industries ceased operations, Big Lots called upon suppliers old and new to make up for the loss.
“We've expanded our strategic relationship with existing partners and brought on new ones, which have set us up with better product quality,” Thorn said. The CEO expects it will take a couple of quarters to fully offset the impact from United Furniture’s sudden closure.
United Furniture Industries represented 7% of total receipts and was the primary manufacturer of Broyhill furniture products. It also supplied some of Big Lots’ Real Living products.
"Their abrupt closure resulted in trucks en route to our stores to be turned around, and we have not received any product from them since then as the banks work out their situation with UFI," Thorn said.
The loss of a major supplier compounded financial challenges for Big Lots, which has also been dealing with elevated inventory levels. The company “overbought inventory and had to engage in unprecedented levels of markdowns to clear it out,” Thorn said. The closure comes as the retailer is already suffering financially: As of Thursday, ratings firm CreditRiskMonitor gave Big Lots a FRISK score of 2, which indicates a a 4% to 10% chance of filing for bankruptcy in the next 12 months.
Thorn remains confident that the new relationships with suppliers will put the company on better footing going forward. New vendor relationships are expected to increase product quality and open new opportunities such as delivery to stores.
“We're weathering this storm, and we're setting up the conditions for our success and our customers’ success in the back half,” Thorn said.
