A “Store Closing” banner on a Bed Bath & Beyond store in Farmingdale, Recent York, on Friday, Jan. 6, 2023.
Johnny Milano | Bloomberg | Getty Images
Bed Bath & Beyond on Sunday filed for Chapter 11 bankruptcy protection after it failed in several last-ditch efforts to lift enough money to maintain the corporate alive.
The beleaguered home goods retailer has been warning of a possible bankruptcy since early January, when it issued a “going concern” notice that it might not have the money to cover expenses after a dismal holiday season. Shares of the corporate closed at 29 cents Friday, giving it a market value of $136.9 million. The stock is down about 88% this 12 months. Last April, it was trading around $20 a share.
The corporate’s 360 namesake stores and 120 Buybuy Baby locations will remain open in the interim because it begins to shut the business and liquidate assets. But it surely has filed motions in Recent Jersey bankruptcy court asking permission to auction the 2 brands, the corporate said in a release. It has already committed to closing all of its Harmon FaceValue stores.
As of late November, Bed Bath had about $4.4 billion in assets and $5.2 billion in debts, court filings show. Alongside an extended list of creditors, including vendors like Pinterest, Keurig and Blue Yonder, it owes essentially the most to BNY Mellon at $1.18 billion, the documents show. It has between 25,001 and 50,000 total creditors and employs about 14,000 non-seasonal employees, court filings say.
“Thousands and thousands of shoppers have trusted us through an important milestones of their lives – from going to school to getting married, settling right into a recent home to having a baby. Our teams have worked with incredible purpose to support and strengthen our beloved banners, Bed Bath & Beyond and buybuy BABY,” CEO Sue Gove said in an announcement.
Sixth Street has agreed to lend Bed Bath $240 million in debtor-in-possession financing so the corporate can have the money flow mandatory to support operations through the bankruptcy process. Bed Bath said it plans to proceed to pay employees wages and advantages, maintain customer programs and honor obligations to vendors.
Holly Etlin, a longtime retail turnaround expert and a partner and managing director with advisory group AlixPartners, has been appointed as Bed Bath’s chief financial officer and chief restructuring officer, filings say.
“Bed Bath and Beyond has finally succumbed to the very fact its business is broken and filed for bankruptcy,” said Neil Saunders, a retail analyst and consultant who works as managing director of GlobalData.
“While it has been an extended time coming,” he said, “they simply couldn’t defy gravity perpetually.”
The downward spiral
Bed Bath has been hanging on by a thread since January but has refused to go down and not using a fight. It secured what was then-considered a Hail Mary stock offering in early February that was expected to infuse greater than $1 billion in equity into Bed Bath, however the plan faltered and brought in just $360 million, the corporate said.
At the top of March, Bed Bath announced one other stock offering it hoped would herald $300 million, but that news sent the share price tumbling and it struggled to lift the funds it hoped the offering would supply. As of April 10, the corporate had sold roughly 100.1 million shares and raised only $48.5 million.
In filings, the corporate warned if it didn’t raise the anticipated proceeds from the offering, it will likely need to file for bankruptcy protection.
Days after the second stock offering was announced, Bed Bath said it had partnered with liquidator Hilco Global to spice up its inventory levels. Under the agreement, Hilco subsidiary ReStore Capital agreed to purchase as much as $120 million in merchandise from the corporate’s key suppliers after relationships with Bed Bath’s vendors soured due to its liquidity issues.
Nevertheless, the plans ultimately proved futile.
The retailer has struggled to take care of relationships with its vendors and has been grappling with low inventory levels, lagging sales and a rapidly dwindling money pile.
Going into the vacation season, Bed Bath had difficulty keeping its shelves stocked and since of its liquidity issues, some vendors began asking for prepayments, the corporate said in securities filings.
In late March, the corporate reported preliminary results for its fiscal fourth quarter, with net sales of roughly $1.2 billion and comparable store sales declining within the range of 40% to 50%. The corporate noted negative operating losses have continued, even though it said it hadn’t depleted its free money flow.
The corporate reported $2.05 billion in revenue for the fiscal fourth quarter of 2021.
Leadership shuffles and failed plans
For years, Bed Bath enjoyed healthy annual profits but as giants like Amazon got here into the image and commenced chipping away on the retailer’s market share, its profits began to slip.
Within the twelve months ended March 2, 2019, the corporate posted $137 million in net losses and since then, hasn’t managed to dig itself out of the red.
In October of that 12 months, the corporate tapped Goal veteran Mark Tritton to be its CEO. He launched an aggressive strategy change that favored private label brands over national brands in a bid to spice up to the retailers bottom line. The margins are higher for personal label brands and the same strategy had worked at Goal under Tritton’s leadership – however the merchandise shift didn’t land with customers.
Further, with a concentrate on private label brands, many manufacturing and logistics fell under Bed Bath’s responsibility, which became increasingly difficult when the Covid-19 pandemic hit early the next 12 months.
“If there’s a single point of failure of Bed Bath and Beyond, it’s that the corporate stopped being relevant to consumers. Arguably, this goes back a good distance because of the rise of online and the advance of home offers at rivals like Goal. Against this increased competition, Bed Bath and Beyond’s approach to retail – which lacked inspiration – was found wanting,” said Saunders.
Saunders called Tritton’s turnaround efforts “poorly executed and out of alignment with what shoppers wanted.”
Last June, Bed Bath announced it will replace Tritton with Gove. She then launched her own ambitious turnaround plan, which she hoped could save the business. Nevertheless, she struggled to repair the business’s relationship with key vendors and the turnaround efforts coincided with high inflation that affected consumer spending while rising rates of interest slowed the housing market.
Plus, consumers who had spent 2020 and 2021 staying at home and updating their living spaces amid the pandemic were now spending on travel, eating out and other out-of-home experiences.
The corporate experienced more upheaval last 12 months, including transient involvement by activist investor Ryan Cohen over the summer and the suicide of Bed Bath finance chief Gustavo Arnal in September. In mid-January, the corporate was looking to seek out a buyer willing to maintain it afloat with an infusion of money. Soon, though, Bed Bath revealed in a securities filing that it did not have enough money to pay its debts and had defaulted on its credit line with JPMorgan.
The corporate was capable of make its interest payments using funding gained from the primary stock offering, but on the time it warned it will “likely” need to file for bankruptcy and see its assets liquidated if the deal didn’t go as planned.
The corporate had loans with JPMorgan and Sixth Street that were reduced in late March after its second stock offering was announced. On the time, its total revolving commitment decreased from $565 million to $300 million and its revolving credit facility was reduced from $225 million to $175 million. Under the reduced credit agreements, Bed Bath was on the hook for monthly interest payments.
The corporate said it was attempting to lower costs by reducing capital expenditures, closing stores and negotiating lease deals but warned in filings the efforts “might not be successful.”
At a well-liked Bed Bath outpost in Recent York City, a since laid-off staffer recently told CNBC that employees were standing around not knowing what to do after the corporate suddenly cut off in-store pickup and deliveries at the situation.
The employee was told liquidators could be coming the next day and shortly learned they would not receive severance after greater than 20 years with the corporate.
“It was just so fast,” the employee said.