A staple in providing home goods and going beyond is plagued by declining sales and traffic. It’s now considering going the route of a complete restructuring through bankruptcy. The original plan that Bed Bath and Beyond put into place a few months ago didn’t appear as if it was going to be successful.
The changing shift in the retail industry for the goods provided by Bed Bath and Beyond, and how more online options became readily available, has been a primary reason for its slow deterioration. Its original plan, in August, was about reducing its store count and staff reduction as a way of immediate cost-cutting measures. Yet the cash needed for this plan to go into effect didn’t come from the expected holiday results, and now the retail giant is looking for outside help.
Managing Director at Global Data, Neil Saunders, chimed in and said “Pre-holiday season everything seemed plausible. Yet it’s clear now that it went in the opposite direction, and their time may have come to an end.”
A recent statement from Bed Bath and Beyond said, “We have misgivings about the possibility to continue operating going forward.”
Their current CEO, Sue Gove, has been fully tasked with these restructuring plans, but their suppliers don’t feel confident, especially with recent filings stating that the company is about to run out of funds.
So far, in October, Bed Bath and Beyond had only closed about half of the total number of stores from their initial plan. This puts their total store count under 1,000, but their recent preliminary reporting confirmed the slowing sales. By the end of its quarter (which for them is the end of November 2022), it was down by 33% to around $1.3 billion.
It continued to state that there would be nearly $400 million in losses, and it couldn’t tackle the $3 billion in debt it had accumulated. The company’s share price in January 2023 reflects this; where the market cap is at just over $400 million, its highest point was once at $17 billion. However, since the plan discussed in August, share prices have easily dropped around 80%.
Going past bankruptcy, the retailer is considering all its options to help the bleeding stop, and that means breaking up the company and selling off some of its parts. It’s currently in discussion with Kirkland & Ellis, Alix Partners and Lazard Bank to help out with the situation.
Julie Strider, who represents Bed Bath and Beyond, said, “We haven’t selected a specific route just yet.”
Regardless of what it chooses to do, without the ability to raise funds quickly, it will have no choice but to file and get that bankruptcy approved eventually.
Yet they may not want to take too long to think about their options because bankruptcy may be the best option, especially when managing their ever-growing losses and compounding debt. Moreover, it’s helped others, such as Neiman Marcus in retail, rebuild their company’s image and eventually build healthier sales. Otherwise, Bed Bath & Beyond can easily go down the route of forced closure, much like what happened to Toys “R” Us.
Retail Analyst at D.A. Davidson Michael Baker feels that “This simply looks like the company is biding their time, and coming up with the obvious plan of shedding down the business, but typically ends up in total liquidation.”
Suppliers are also not budging in this situation, so as debt payments keep strangling the cash flows, the suppliers’ faith will continue to dwindle, and any repairs to the process involved here require funding and time.
Ms Gove agreed and said, “The size of this company needs time for transformation. So it will be an iterative growth and repair quarter over quarter.”
She has even taken proactive steps to try to work with suppliers directly and rebuild the trust and confidence in the business. Yet suppliers are still steadfast in their situation and have even reduced their available inventories, while there’s a global supply chain issue already happening with the current tough COVID strategy in China. As a result, suppliers are looking to find those with a faster sales turnover.
Beyond the suppliers, the company is also going back to its investors and looking to them for support. Yet major investors such as Ryan Cohen had already sold their stocks in August, which made the stock take a dive down 40%
Their financial chief also committed suicide in September 2022, and Laura Crossen took over the help for the time. This added a layer of the mess that was already occurring for the retailer, albeit a sad and devastating one.
What’s happening to this company could also be a sign of major issues happening throughout the retail industry, meaning this may not be the only retailer struggling. Whether it’s massive supply chain problems, continued inflation or the promise of continued interest rate increases, it’s all affecting retailers across the U.S. Even with holiday season numbers showing sales increasing almost 8% over the same holiday period last year, through a report by Mastercard, it could take one more poor quarter or an actual recession that’s already been forecasted.
Even if retailers, such as Bed Bath and Beyond, consider taking out even more debt to help with their plans for surviving, they may find themselves with fewer opportunities to find lenders. A couple of years ago, rates were near zero, allowing lenders to take more risks. Now with the combined issues of the continual supply chain problems, they are not willing to take the risk. That means less product to sell, as well as to hold up as collateral to lenders.
“That will make it extremely difficult to get fresh funds to breathe life into the company. You’re already having issues with your current providers, who seem less willing to release more funds.” Says James Gellert, who is an executive at RapidRatings International. He states, “it just makes it harder for them to dig out of the hole they are in.”