Big Lots: Muddled Market Positioning & A Buyback Gone Wrong

Big Lots had a windfall and spent $418 million buying back stock instead of repositioning. It filed for bankruptcy three years later.

Muddled Positioning

Big Lots was not focused nor differentiated—not as focused as Ollie’s, not as cost competitive as Walmart or Target, not as specialized as HomeGoods. It was positioned in the middle, the worst place possible. Its foray into furniture and later groceries only widened the problem.

The Sale-Leaseback Trap

Under activist pressure, Big Lots sold four distribution centers for $725 million, netting $550 million after taxes. The cap rate on the new leases was higher than the coupon on the debt it paid back. It traded asset ownership and flexibility for cash it would spend poorly.

A Buyback Gone Wrong

Instead of reinvesting to reposition, the Company spent $418 million buying back stock at an average of $54.28 per share. It filed for Chapter 11 bankruptcy in September 2024. The buyback was a $418 million value transfer from ongoing shareholders to selling shareholders.

The Opportunity Cost

If shareholders had received a special dividend and invested in the S&P 500, those proceeds would have returned 90%, or $635 million. Big Lots got a windfall, but it came at a high cost and was not spent well.