Big Lots Snags Hearthsong’s Toys, But Is It Too Late?

Big Lots, the discount home retailer, has made a significant move by acquiring the entire inventory of Hearthsong, a renowned children’s toy brand. This strategic decision aims to reinforce Big Lots’ commitment to offering extreme bargains to consumers.

The acquisition injects over 500 new products and SKUs from Hearthsong into Big Lots stores across the nation. These products encompass a wide range of indoor and outdoor toys, including inflatables, playscapes, games, arts & crafts items, STEM toys, nature and science toys, and kids’ décor. They will be sold at heavily discounted prices, ranging from 50% to 70% less than their original retail prices.

“We’re reclaiming our bargain heritage, and with this impressive acquisition from Hearthsong, our extreme value sourcing team of closeout buyers is delivering on our promise to own closeouts and bring dynamic, innovative products at unmatched prices to our customers. It also signals our very real commitment and unique ability to directly source the best deals for our customers in ways that keep them coming back to our stores to uncover bargains, treasures, and extreme values.”

Bruce Thorn, president and CEO of Big Lots

This acquisition aligns with Big Lots’ recent efforts to revitalize its leadership in off-price and closeout sourcing. Seth Marks, who rejoined the organization in November 2023 as senior vice president of extreme value sourcing, is spearheading this initiative. Marks and his team are dedicated to delivering rapid “end-user” recoveries, extending their services to various stakeholders in the retail ecosystem.

Marks expressed his satisfaction with the Hearthsong acquisition, stating, “We’re pleased to bring this strategic acquisition of Hearthsong toys at never-before-seen closeout prices to our customers and their families this season. Our team’s approach to innovative sourcing and the trust of our partners has been a winning combination. Like our price-savvy customers, we’re continually on the hunt for new deals and bargains.”

The availability of Hearthsong toys at Big Lots stores will commence in April, strategically timed to coincide with the peak of the lawn and garden season, and will continue throughout early summer.

Big Lots’ Struggles

Big Lots has faced a tumultuous journey in recent years, with its stock plummeting from highs of $70 per share to recent lows of $3 per share. Despite these drastic fluctuations, questions linger about whether investors have overreacted and if the stock is now undervalued.

The discount retailer has a history of volatile price movements, experiencing both surges and declines in the market. From rallying from $16 to $30 a share in 2007, only to fall back to $16 by year-end, to dropping from $60 to $15 a share between 2017 and 2019 before rallying again to $63 per share during the pandemic, Big Lots’ trajectory has been erratic.

Analysts’ concerns about Big Lots’ long-term prospects are evident, with Loop Capital downgrading the stock from a hold to a sell and setting a price target of $1 per share. The company’s weak financial performance, exacerbated by high inflation impacting customer spending, has led to a significant decline in stock value.

Efforts to implement a turnaround plan, including reducing freight costs and cutting expenses, have yet to yield substantial results. The company’s liquidity issues, with liabilities totaling over $3.33 billion, further compound its challenges.

Despite initiatives to enhance inventory management and cost-cutting measures, Big Lots continues to face stiff competition from rivals like TJX Companies, Dollar Tree, and Walmart. Additionally, the post-pandemic landscape has dampened consumer spending on discretionary items, affecting Big Lots’ revenue.

Moreover, consumers have taken to social media and shared their thoughts on how Big Lots has become too expensive. This goes against how the company started as a liquidator with a variety of inventory, where shoppers might find brand-name products at incredible deals. They criticize how the retailer only offers the lowest pricing through coupons and financing plans. Overall, they feel that Big Lots’ competitors are better at offering lower prices.

Ultimately, Big Lots’ acquisition of Hearthsong’s inventory signifies a deliberate effort to provide high-quality toys at reduced prices, but will it actually help the retailer?