Bed Bath & Beyond, once known for its well-stocked aisles filled with linens, kitchenware, and unique products, is now facing difficult times.
Despite offering frequent discounts, the Union, New Jersey-based company is struggling with strategic mistakes, poor investments, inconsistent inventory and a lack of interest from consumers. Executives have suggested that bankruptcy may be on the horizon, and many industry experts question whether the 52-year-old retailer will be able to survive.
What are the issues at Bed Bath & Beyond?
The company reported a $393 million loss in the third quarter of 2020, bringing their total losses for the fiscal year to over $1.1 billion. Sales have dropped by 33% compared to the same period the previous year. Neil Saunders, the Managing Director of analytics company GlobalData, commented that the company has seen a gradual decline in customers over time.
What are the earnings of Bed Bath & Beyond in 2022-23?
In a recent earnings call, the CEO of the company, Sue Gove, announced that the company is seeking to reduce costs by $80 million to $100 million. This includes the previously announced closure of 150 stores, as well as layoffs.
Can Bed Bath & Beyond go bankrupt?
Neil Saunders, the Managing Director of analytics company GlobalData, believes that these actions may not be enough to alleviate the company’s financial struggles. Gove did not confirm that the company would file for Chapter 11 bankruptcy, which allows for a reorganization of debt.
Instead, a company spokesperson stated that multiple options are being considered and a decision will be made in a timely manner. However, Patrick Collins, a partner at the law firm Farrell Fritz who specializes in bankruptcy and corporate restructuring, noted that a public acknowledgment of financial troubles typically indicates that the company has reached a point of no return.
According to Patrick Collins, a partner at the law firm Farrell Fritz who specializes in bankruptcy and corporate restructuring, if a company publicly acknowledges financial troubles, suppliers will no longer extend credit and will instead require cash payment upon delivery.
Mark Cohen, the Director of Retail Studies at Columbia University, believes that if the company does file for bankruptcy, it will likely happen soon. This is because many companies file in January, after not paying vendors and having cash from holiday sales to use for legal fees in the bankruptcy process.
Cohen also stated that there is a possibility that the company may go straight to liquidation through a Chapter 7 filing. He further said that unless the company is acquired or receives a significant injection of cash, or enters into a pre-packaged bankruptcy, the company may not survive.
When was Bed Bath & Beyond established?
Bed Bath & Beyond, which was founded in 1971 and was one of the first major retailers in the specialty store space, has seen a decline in business since 2010. This can be attributed to increased competition from retailers such as Amazon, Wayfair, Walmart, Target, and others, who have expanded their home goods offerings.
The company also made some unprofitable investments, such as the acquisition of One Kings Lane for $12 million in 2016, which was later sold in 2020. Mark Tritton, who served as CEO of Bed Bath & Beyond starting in 2019, attempted to revamp the company’s private label home brand in an attempt to replicate his success at Target, but these efforts were not successful.
He also made other decisions that were not beneficial for the company, such as overseeing a $1 billion stock buyback, before being replaced by Sue Gove in June 2020.
Mark Tritton’s decision to oversee a $1 billion stock buyback has been criticized as a misstep by Mark Cohen, Director of Retail Studies at Columbia University. Additionally, Bed Bath & Beyond struggled with managing their inventory and supply chain operations, resulting in some shelves being overstocked while others were empty.
What was Bath & Beyond coupons?
The company’s reliance on coupons as a means of attracting customers also became a burden on their finances. Cohen commented that it is difficult to shift customers’ focus and break away from the perception that Bed Bath & Beyond is a store that offers discounts and deals.
Despite the surge in consumer spending during the pandemic, when people were spending more time at home, Bed Bath & Beyond was not able to take advantage of this trend, according to Neil Saunders, Managing Director of analytics company GlobalData.
Bed Bath & Beyond growth in 2022
As the economic conditions changed, and inflation remained high, consumer discretionary spending decreased, affecting most retailers. However, Bed Bath & Beyond was hit particularly hard. Foot traffic has dropped significantly, with a 26.5% decrease in December compared to the previous year, according to data from Placer.ai. Mark Cohen, Director of Retail Studies at Columbia University, noted that customers are not inclined to shop in stores that have empty shelves, similar to how they avoid dining in empty restaurants or visiting empty malls.
As news of Bed Bath & Beyond’s financial struggles and poor performance have become more widespread, many vendors have become hesitant to extend credit to the company, fearing they will not be paid if the company files for bankruptcy. Experts believe that the company’s best course of action would be to file for Chapter 11 protection or find a buyer for its debt.
Bed Bath & Beyond future in 2023
Mark Cohen, Director of Retail Studies at Columbia University, suggests that there may be companies interested in buying the company’s debt at a discounted price. However, Neil Saunders, Managing Director of analytics company GlobalData, notes that any potential buyer would likely want to acquire the company at a very low cost.
It has been reported that the company is in talks with private-equity firm Sycamore Partners to sell its Buy Buy Baby subsidiary and other assets, and that there are also other potential buyers being considered.
Bed Bath & Beyond has not commented on the reports of potential sales and declined to speak about any such speculation in a statement to The Washington Post.
Bed Bath & Beyond stock in 2023
The company’s stock dropped 30.1% after the reports, ending a five-day rally that had seen the stock increase by more than 350% in August. Neil Saunders, the Managing Director of analytics company GlobalData, expressed doubt that the company would be able to successfully turn around if it filed for bankruptcy, as it is currently focused on survival rather than developing a long-term strategy.
Saunders noted that while filing for bankruptcy may prevent the company from going under, it does not ensure that the company will be in a stable position in the future.
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