Bed Bath & Beyond posted a worse-than-expected loss of $393 million in the third quarter ended Nov. 26, pushing its loss for the fiscal year to $1.1 billion. Sales decreased by 33 percent compared to the same period last year.
“What we’re seeing is a mixed situation, and it’s really been a long time in the making,” said Neil Saunders, managing director of analytics firm GlobalData. There has been a “gentle attrition of customers … year after year.”
20-year-old student earns $110 million from trading Bed Bath & Beyond meme stock
On Tuesday’s earnings call, Chief Executive Sue Gove said the company is working with a group of consultants as it seeks to cut costs by $80 million to $100 million. It is continuing with plans announced in August to close 150 stores and said an undisclosed number of layoffs is underway.
“I don’t think it’s going to be enough to rebalance the book because the losses are just terrible and they’re still in this predicament,” Saunders said.
Gove did not say that Chapter 11, which allows troubled companies to save themselves by restructuring their debt, was definitive. A company spokeswoman told The Washington Post on Friday that “multiple avenues are being explored and we are determining our next steps thoroughly and in a timely manner.”
But public recognition generally means no turning back, said Patrick Collins, a partner at the New York-based law firm Farrell Fritz, who focuses on bankruptcy and corporate restructuring.
“It becomes inevitable,” Collins said. “Because if you’re a supplier and you hear this, you’re not going to give credit to Bath Bath & Beyond anymore – you’re going to ask for cash on delivery.”
Mark Cohen, director of retail at Columbia University, expects that if a bankruptcy filing is filed, it will happen soon. Most companies file in January because they haven’t paid their vendors, and fresh cash from holiday sales can be used to pay legal fees in the bankruptcy process.
Cohen added that the company even has a chance It goes straight to liquidation through a Chapter 7 filing.
“There is no suitor who buys the company or injects a lot of visible cash into the company or gets involved in the company’s debts and takes it into pre-packaged bankruptcy – the company is toast,” he said.
“Terrible, Terrible Mistake”
Founded in 1971, Bed Bath & Beyond was one of the first big ones retailers dedicated shop area. It has become the go-to place for homewares, small kitchen appliances, and wedding favors and college dorm supplies. Business began to cool in 2010 as Saunders ramped up homewares production from Amazon, Wayfair, Walmart, Target and other brands. (Amazon founder Jeff Bezos owns The Washington Post.)
Meanwhile, the company has overcome some setbacks, such as its $12 million purchase of One Kings Lane in 2016. Bed Bath & Beyond sold the online home decor company in 2020.
Mark Tritton, who took over as CEO of Bed Bath & Beyond in 2019, moved to revamp the retailer’s private label house brand — trying to replicate the success he had as head of merchandising at Target. He shifted his focus and resources, but investment didn’t pay, Cohen said.
Cohen made other ill-advised decisions before being replaced by Gove last June, including leading a $1 billion share buyback.
“He did it because he didn’t know what he was doing, or he was forced to do it, it was a terrible, terrible mistake,” Cohen said.
While most of its competitors were struggling with excess inventory, Bed Bath & Beyond was a mixed bag. Saunders said supply chain operations were poorly managed. Some shelves were filled to the brim, others were bare. Almost synonymous with Bed Bath & Beyond, coupons have become a necessary evil. Discounts became a burden on the company’s revenue, but also attracted customers.
“It takes a long time to shift the focus of the customer, let alone thread the needle on these millions of ‘X’ interest rate discounts that have been in people’s mailboxes for years,” he said.
Free online returns period ends
Although the company was able to ride the wave of consumer spending during the pandemic – when Americans were forced to spend more time at home. – he failed to capitalize on the momentum, Saunders said. Then, as the economic climate changed, stubbornly high inflation cut into Americans’ discretionary purchases. That hurt most retailers, but “Bed Bath & Beyond collapsed like no other retailer had,” Saunders said.
According to analytics firm Placer.ai, foot traffic is down sharply — down 26.5 percent year-over-year in December.
“Customers don’t easily dine in empty restaurants, they don’t easily go to empty malls, and they certainly don’t shop at stores with empty shelves,” Cohen said.
As news of Bed Bath & Beyond’s dwindling cash flow and poor performance spread over the past four months, many sellers decided it was too risky to offer the company’s product on credit. If he files for bankruptcy, there is a high probability that they will not be paid.
There are several other variations of the chain. Experts say the best option is to file for Chapter 11 protection or find a third party to take on the debt.
“My guess is that there are vultures in the middle who are thinking or thinking or thinking about taking control of the company through debt, accounts payable and other liabilities,” he said.
But that had to come at an “absolutely bargain, knock-down price,” Saunders noted.
A report emerged on Friday that the company is in talks with private equity firm Sycamore Partners to sell its Buy Buy Baby subsidiary and other assets. The New York Times article, citing unnamed people, says there are deals with other parties as well.
In a statement to The Post, the retailer declined to talk about any potential sale. “We do not comment on speculation of this nature.”
The company’s shares fell 30.1 percent to $3.66 after the report, ending a fiery five-day rally that drew comparisons to Bed Bath & Beyond’s wild meme-filled ride over the summer. It grew more than 350 percent in August, fueled mostly by online message boards.
Saunders doubts Bed Bath & Beyond can stage a turnaround if it files for bankruptcy. According to him, it focuses more on staying afloat than creating a long-term strategy.
“The problem is, just because you save a ship from sinking, that doesn’t mean … then you have a seaworthy ship,” Saunders said. “You’ve got a ship that you’re just preventing from going under. But you’re still at real risk of going down the deep end in the future.”