A pedestrian walks by a Bed Bath and Beyond store in San Francisco, California.
Justin Sullivan | Getty Images
When Bed Bath & Beyond leaders speak to investors Tuesday morning, they will not simply report sales and earnings results. They’ll have to deal with a stark reality: The cash-strapped home goods retailer is running out of time.
On Thursday, Bed Bath warned it can have to file for bankruptcy, saying it could soon be unable to cover costs as sales lag and store traffic dwindles. It also said it’s struggling to maintain items in stock, because it runs low on money and works to treatment strained relationships with suppliers.
The nationwide chain, known for its 20% coupons and sky-high piles of towels and housewares, is increasingly prone to joining the list of shops which have shuttered stores and faded away. Think, Sears. Circuit City. RadioShack. Pier 1. Linens ‘n Things.
What’s more, the attempted turnaround comes at the identical time that inflation weighs on consumers’ wallets and because the housing market gets hit by higher rates of interest. Plus, after spending the sooner years of the Covid pandemic at home, more persons are selecting to spend money on dining out or booking trips slightly than buying cookware, a duvet or throw pillows.
“When you’ve got a shift in how consumers are allocating their spending, and a recession looming potentially on the horizon, it makes it rather more of an uphill battle,” said Justin Kleber, senior research analyst at Baird Equity Research.
The corporate’s stock performance reflects its tough path forward, too. Shares of the corporate touched a 52-week low on Friday. As of Monday’s close, they were trading around $1.62 for a market value of lower than $150 million.
Chasing a comeback
Those efforts have brought its operating costs down, because it tries to drive up sales: For the third quarter, Bed Bath expects operating expenses to be about $583.6 million, compared with about $698 million within the year-ago period, it said Thursday.
The corporate’s turnaround strategy also involved phasing out a few of its private labels and bringing back more well-recognized national brands. It pledged in August to work with those national brands to develop exclusive items and so as to add items from direct-to-consumer brands — merchandise aimed toward setting it apart and giving shoppers a reason to come back back to its stores.
Come Tuesday, investors will need to hear if the corporate has improved its inventory levels, in the event that they managed to secure any exclusive items for the vacation season and the way willing vendors have been to work with the retailer. If Bed Bath has made significant inroads in improving inventory, it could offer a glimmer of hope for the quarters ahead.
“Being the primary to bring latest brands and products to our customer has at all times been one in all our roles as a retailer,” Executive Vice President Mara Sirhal told investors during an Aug. 31 business update. “In the house market, there’re many D2C brands which bring their very own compelling brand marketing and followers who know and wish them but aren’t widely available to buy.”
Emerging direct-to-consumer brands have an incentive to partner with brick-and-mortar shops like Bed Bath and Goal, as they provide a option to reach more customers and a reprieve from the e-commerce cooldown, steep marketing costs and consumer habit shifts which have cut into profitability because the pandemic began to wane.
But brands and vendors have been hesitant to increase credit to Bed Bath as its mounting debt solid doubt over its ability to pay back bills.
And sales trends overall have remained weak.
The corporate said Thursday it expects net sales for the fiscal third quarter, which ended Nov. 26, to be about $1.26 billion — a virtually 33% drop from the $1.88 billion it reported for the year-ago period. Bed Bath anticipates a net lack of about $385.8 million for the quarter, an roughly 40% jump in losses 12 months over 12 months. Those quarterly losses include an roughly $100 million impairment charge, which was not specified.
CEO Sue Gove urged patience on Thursday, saying the turnaround will take time. She took the helm after former CEO Mark Tritton was pushed out in June.
“Transforming a corporation of our size and scale requires time, and we anticipate that every coming quarter will construct on our progress,” she said in a news release.
Baird’s Kleber said investors will need to hear if there’s been a change in sales trends throughout the Christmas season — key weeks that may be reflected in fourth-quarter results, but could possibly be previewed sooner.
‘Kiss of death’?
Before Bed Bath can address moving product off shelves, though, it must tackle a good more fundamental problem: having enough merchandise to fill them.
Gove said low inventory was partially guilty for the corporate’s anticipated third-quarter losses.
Bed Bath is using dollars it earned throughout the holiday season to bulk up the shelves with help from its key vendors, Gove said. As in-stock levels have improved, so have sales trends, she said.
Nevertheless it’s not clear if that can be enough.
“At the tip of the day, the entire yabba dabba doo about their newly minted strategy that they were touting during the last six months. It’s all just plenty of talk,” said Mark Cohen, a professor and director of retail studies at Columbia Business School.
Cohen said he sees the going-concern warning because the “kiss of death” for Bed Bath, solidifying bankruptcy because the retailer’s only remaining option — beyond a savior swooping in with an infusion of money or to purchase a stake of the corporate.
“With no defining event of that kind, this company is toast,” said Cohen, former CEO of Sears Canada.