Bed Bath & Beyond posted a worse-than-expected $393 million loss in the third quarter that ended Nov. 26, lifting its fiscal year-to-date loss to above $1.1 billion. Sales fell 33 percent from the same three-month period last year.
“What we’re seeing is a tumultuous situation, and it’s really been a long time in the making,” said Neil Saunders, CEO of analytics firm GlobalData. There has been a “gentle erosion of customers… year after year.”
20-year-old student wins $110 million trading Bed Bath & Beyond meme shares
In an earnings call on Tuesday, chief executive Sue Gove said the company is working with a team of advisers as it seeks to reduce its costs by between $80 million and $100 million. It is proceeding with plans announced in August to close 150 stores and has said an undisclosed number of layoffs are underway.
“I don’t think that’s enough to rebalance the book, because the losses are just terrible and they’re still in dire straits,” Saunders said.
Gove did not say a Chapter 11 filing, which allows troubled companies to save themselves through a debt reorganization, was final. On Friday, a company spokesperson said in a statement to The Washington Post that “multiple paths are being explored and we are determining our next steps thoroughly and in a timely manner.”
But public recognition usually means there’s no going back, said Patrick Collins, a partner at the New York-based law firm Farrell Fritz, which focuses on bankruptcies and corporate restructuring.
“It becomes inevitable,” Collins said. “Because if you’re a vendor and you hear that, you’re not giving Bath Bath & Beyond credit anymore; will insist on cash on delivery.”
If there is going to be a bankruptcy filing, Mark Cohen, director of retail studies at Columbia University, expects it to happen soon. Most businesses file in January because they haven’t paid their suppliers and have fresh cash from holiday sales that can be used to pay legal fees in bankruptcy proceedings.
Cohen added that there is an even chance that the company heading straight for liquidation via a Chapter 7 filing.
“In the absence of a suitor who buys the company or injects some kind of highly visible cash into it, or gets involved in the company’s debts and drives it into pre-arranged bankruptcy, the company is ruined,” Cohen said.
‘A terrible, terrible mistake’
Founded in 1971, Bed Bath & Beyond was one of the first large retailers in the Space for specialized stores. It became the go-to destination for household items, small kitchen appliances, wedding registry. and college dorm supplies. But business started to cool off in 2010, Saunders said, as Amazon, Wayfair, Walmart, Target and other brands beefed up their housewares lines. (Amazon founder Jeff Bezos owns The Washington Post.)
Meanwhile, the company racked up a few missteps, such as its $12 million acquisition of One Kings Lane in 2016. Bed Bath & Beyond sold the online home décor company in 2020.
Mark Tritton, who took over as CEO of Bed Bath & Beyond in 2019, has moved to revamp the retailer’s own private label brand, trying to replicate the success he had as head of merchandising at Target. He changed his focus and resources, but the investment it wasn’t worth it, Cohen said.
He made other ill-advised decisions before being replaced by Gove last June, Cohen said, including presiding over a $1 billion share buyback.
“Whether he did it because he didn’t know what he was doing or was pushed into it, it was a terrible, terrible mistake,” Cohen said.
And since most of its competitors struggled with excess inventory, Bed Bath & Beyond was a mixed bag. Saunders said his supply chain operations were mismanaged. Some shelves were filled to the brim, while others were empty. And coupons, which are almost synonymous with Bed Bath & Beyond, have become a necessary evil. Discounts became a drag on the company’s bottom line, but they were also what attracted customers.
“It takes a long time to change a customer’s focus, let alone pull the needle out of these millions of ‘X’ percent off coupons that have been sitting in people’s mailboxes for years,” he said. Cohen.
The era of free online returns is coming to an end
Although the company was able to ride the wave of consumer spending during the pandemic, when Americans were forced to spend more time at home. – failed to capitalize on momentum, Saunders said. Then, as the economic climate changed, stubbornly high inflation reduced Americans’ discretionary purchases. This affected most retailers, but “Bed Bath & Beyond collapsed in a way no other retailer had ever seen,” Saunders added.
Foot traffic is down dramatically — down 26.5 percent in December, year-over-year, according to analytics firm Placer.ai.
“Customers don’t easily dine in empty restaurants, they don’t easily go to empty malls and they certainly don’t shop in stores with empty shelves,” Cohen said.
Over the past four months, as news of Bed Bath & Beyond’s dwindling cash and poor performance spread, many vendors decided it was too risky to give the company’s product on credit. If you file for bankruptcy, chances are you won’t get paid.
The chain seems to have a few other options. Experts say your best bet is to file for Chapter 11 protection or find an interested party to buy out the debt.
“I guess there are vultures out there considering or have been considering swoop in and basically take over the company through their debt, through their accounts payable and other debt,” Cohen said.
But this would have to come at an “absolute bargain price,” Saunders noted.
On Friday, a report emerged that the company is in talks with Sycamore Partners, a private equity firm, to sell its Buy Buy Baby subsidiary and other assets. A New York Times article, citing unnamed people close to the matter, said deals with other parties are also at stake.
In a statement to The Post, the retailer declined to discuss possible sales. “We do not comment on speculation of this nature.”
Shares of the company fell 30.1 percent after the report, to $3.66, ending a ferocious five-day rally that drew comparisons to Bed Bath & Beyond’s wild, meme-fueled ride over the summer. It shot up more than 350 percent in August, fueled in large part by online message boards.
Saunders doubts that Bed Bath & Beyond can achieve a radical change if it files for bankruptcy. He is too focused on staying afloat than forming a long-term strategy, he said.
“The problem is that you prevent a ship from sinking, that doesn’t mean you have a seaworthy ship,” Saunders said. “You only have a ship that you saved from sinking. But you still run a real risk of diving into the depths in the future.”