Bed Bath & Beyond posted a lower-than-expected loss of $393 million in the third quarter ended November 26, boosting its prior fiscal year loss to more than $1.1 billion. Sales fell 33% from his three months to the same as last year.
Neil Saunders, managing director of analytics firm Global Data, said: There has been a “gentle erosion of customers… all year round.”
On Tuesday’s earnings call, Chief Executive Sue Gove said the company is working with a team of advisers to cut costs from $80 million to $100 million. It is moving forward with plans to close 150 stores announced in August, and says an undisclosed number of layoffs are underway.
“The loss is terrible and they are still in these dire circumstances, so I don’t think it will be enough to restore the balance of the book,” Sanders said.
Gove said the Chapter 11 filing, which would allow troubled companies to rescue themselves through debt restructuring, was not final. “Multiple avenues are being explored and we are thoroughly and timely determining next steps,” a company spokesperson said in a statement to The Washington Post on Friday.
But public recognition generally means there is no turning back, said Patrick Collins, a partner at Pharrell Fritz, a New York-based law firm focused on bankruptcy and corporate restructuring.
“It’s inevitable,” Collins said. “If you were a supplier and you heard that, I wouldn’t give Bath Bath & Beyond any more credit. You would stick with Cod.”
If there is a bankruptcy filing, Marc Cohen, director of retail research at Columbia University, expects it to happen soon. Most businesses file in January because they haven’t paid their vendors and have fresh cash from the holiday sale that they can use to pay their attorneys’ fees in bankruptcy proceedings.
Cohen added that it could also be the company. Go straight to liquidation through Chapter 7 filing.
“If there are no suitors to buy the company, inject very visible cash into it, or get involved in the company’s debt and drive it into pre-packaged bankruptcy, the company is toast,” Cohen said. said.
“Terrible, Terrible Mistake”
Founded in 1971, Bed Bath & Beyond was one of the first major companies. retailers of specialty store space.It has become a popular destination for homewares, small kitchen items and wedding registries And college dormitory supplies. But business began to cool off in 2010, Sanders said, as brands like Amazon, Wayfair, Walmart and Target stepped up their home product lines. (Amazon founder Jeff Bezos owns the Washington Post.)
Meanwhile, the company has had a few missteps, including its $12 million acquisition of One Kings Lane in 2016. Bed Bath & Beyond sold its online home decor company in 2020.
Mark Tritton, who became CEO of Bed Bath & Beyond in 2019, has moved to revamp the retailer’s private label home brand. It seeks to replicate Target’s success as head of merchandising.Although he has shifted its focus and resources, the investment It didn’t pay off, Cohen said.
Cohen said he made other unwise decisions, including presiding over a $1 billion share buyback, before being replaced by Gove last June.
“Whether he did it because he didn’t know what he was doing or was forced to do it, it was a terrible, terrible mistake,” Cohen said.
And Bed Bath & Beyond was a mixed bag, as most of its competitors suffered from overstocking. Sanders said supply chain operations were poorly managed. Some shelves were stuffed to the brim, while others were bare. And coupons, almost synonymous with Bed Bath & Beyond, have become a necessary evil. Discounts weighed on the company’s bottom line, but they also attracted customers.
“It takes a long time to change customer interest, let alone pull the needle on the millions of ‘X’ percent off coupons that have been in people’s mailboxes for years,” Cohen said. say.
The company was able to ride the wave of consumer spending during the pandemic — when Americans were forced to spend more time at home — We couldn’t capitalize on the momentum, Sanders said. Then, as economic conditions changed, stubbornly high inflation affected Americans’ discretionary purchases. While this hit most retailers, “Bed Bath & Beyond tumbled in a way no other retailer has seen,” Saunders added.
According to analytics firm Placer.ai, foot traffic fell 26.5% year-over-year in December.
“Customers don’t immediately eat in empty restaurants, rush to empty malls, or shop in stores with empty shelves,” says Cohen.
Over the past four months, news of Bed Bath & Beyond’s declining cash and poor performance has spread, leading many vendors to decide that it was too risky to extend credit for their products. If you go bankrupt, it’s more likely that you won’t get paid.
The chain seems to have some other options. Your best bet, experts say, is to apply for Chapter 11 protection or find a stakeholder to buy the debt.
“My guess is that there are vultures out there that are or were considering swooping in on the company and basically taking control of the company through debt and accounts payable and other debt.” said Cohen.
But this would have to come at an “absolute bargain, knockdown price,” Sanders said.
Reports surfaced on Friday that the company is in talks with private equity firm Sycamore Partners to sell its subsidiary Buy Buy Baby and other assets. A New York Times article, citing unnamed people close to the matter, said deals with other parties were also underway.
In a statement to the Post, the retailer declined to discuss potential sales. “We do not comment on this type of speculation.”
The company’s stock plummeted 30.1% to $3.66 after the report, ending a blistering five-day rally compared to Bed Bath & Beyond’s wild meme strain-backed summer ride. August saw a spike of over 350%, driven primarily by online message boards.
Sanders doesn’t think Bed, Bath & Beyond can pull off a restructuring if it files for bankruptcy. Said.
“The problem is that saving a ship from sinking does not mean you have a seaworthy ship,” Sanders said. “You only have a ship that you have saved from sinking. But you are still in danger of going deep into the future.”
