Bed Bath & Beyond files for bankruptcy

New York (CNN) Bed Bath & Beyond, the store for seemingly everything in your home in the 1990s and 2000s, filed for bankruptcy on Sunday.

“Thank you to all of our loyal customers. We have made the difficult decision to begin winding down our business,” a statement at the top of the company’s website said Sunday morning.

The company’s 360 Bed Bath & Beyond locations, along with its 120 buybuy BABY stores, will remain open for now, as will websites. The company secured a $240 million loan to help finance operations during bankruptcy.

But the store closing sale begins Wednesday, and Bed Bath & Beyond will close some stores. How many – or what happens to the 14,000 employees – depends on what happens next.

A declaration of bankruptcy does not necessarily mean that a company goes out of business. Many large American companies have filed for bankruptcy, using it to get rid of debt and other costs they could no longer afford. But even if Bed Bath and Beyond emerges from bankruptcy, its future is not guaranteed.

The company said it would seek to sell part or all of the business. If it is able to find a buyer, Bed Bath & Beyond will stop store closings. But if a buyer doesn’t come forward, Bed Bath & Beyond will likely be completely liquidated and go out of business.

It’s also possible the company could emerge from bankruptcy as an online retailer, said Neil Saunders, analyst at GlobalData Retail.

“Ultimately, if it emerges from bankruptcy at all, Bed Bath & Beyond will be a shadow of its former self,” he said.

Bed Bath & Beyond had been a crown jewel in the era of so-called “category killers” — chains that dominated a retail category, such as Toys “R” Us, Circuit City and Sports Authority. These companies, too, filed for bankruptcy as shoppers turned away from large specialty stores in favor of online alternatives like Amazon.

Chris Hammons unloads a bag of merchandise she purchased at a Bed Bath & Beyond store in Dallas, Texas on September 23, 2009.

Bed Bath & Beyond became known for pots and pans, towels and linens stacked floor to ceiling in its cavernous stores—and for its ubiquitous 20% off coupons. The blue-and-white coupons became something of a pop culture symbol, and millions of Americans ended up stashing them in their cars, closets and basements.

The company said customers will have Sunday, Monday and Tuesday to use the remaining 20% ​​off coupons. The company will stop accepting them on Wednesday. Instead, Bed Bath & Beyond expects to offer “deep discounts” on its products as part of its going-out-of-business sales.

The retailer attracted a wide range of customers by selling name brands at reduced prices. Brands coveted a spot on Bed Bath & Beyond’s shelves, knowing it would lead to big sales. In addition, the open store encouraged impulse purchases: Shoppers came in to buy new dishes and left with pillows, towels and other items.

Stores were a regular fixture for shoppers around the winter holidays and during back-to-school and college seasons, and Bed Bath & Beyond also had a strong baby and wedding registry business.

But the New Jersey-based company has been slow to respond to shopping changes and struggled to lure customers who had moved on to Amazon, Target and other chains.

In its bankruptcy filing, Bed Bath & Beyond said it had $5.2 billion in debt and assets of just $4.4 billion. It secured $240 million in financing Sunday to stay afloat just long enough to close stores and wind down operations.

The company urged customers to seek out its discounted items later this week. Items purchased before Wednesday can be returned until May 24, but all sales after Wednesday will be final. The store will stop accepting gift cards on 8 May.

Superstore era

Founded in 1971 by Warren Eisenberg and Leonard Feinstein, two discount industry veterans in Springfield, New Jersey, the chain of small linen and bath stores — then called Bed ‘n Bath — first grew around the Northeast and California, selling designer bedding. , a new trend at the time. Unlike department stores, it did not rely on sales events to draw in customers.

The company changed its name to Bed Bath & Beyond in 1987 to reflect its expanded merchandise and larger “superstores.” The company went public in 1992 with 38 stores and around 200 million dollars in sales.

“We had witnessed the department store shakeout and knew that specialty stores were going to be the next wave of retail,” Feinstein said in 1993. “That was the beginning of the designer approach to linens and housewares, and we saw a real window of opportunity.”

Customers checking out items in shopping carts at a Bed, Bath & Beyond store in New York City on January 18, 1994.

In 2000, these numbers rose to 241 stores and $1.1 billion in annual sales. The 1,000th Bed Bath & Beyond store opened in 2009, when the chain had reached $7.8 billion in annual sales.

The company was something of an iconoclast. It spent little on advertising, relying instead on printed coupons distributed in weekly newspapers to attract customers.

“Why not just tell the customer we’re giving you a discount on the item you want — and not the one we want to sell? We’ll mail a coupon and it will be much cheaper,” Eisenberg said in a New York Times interview from 2020.

The chain was known for giving store managers the autonomy to decide which products to stock, allowing them to customize their individual stores, and for shipping products directly to stores instead of a central warehouse.

The rise of online shopping

But as brick-and-mortar began to give way to e-commerce, Bed Bath & Beyond was slow to make the transition — a misstep compounded by the fact that home decor is one of the most purchased categories online.

“We missed the boat on the internet,” Eisenberg said in a recent Wall Street Journal interview. (The co-founders are no longer involved in the company.)

Online shopping weakened the allure of Bed Bath & Beyond’s fan-favorite coupons, too, because consumers could find many cheaper options on Amazon or browse a wider selection on sites like Wayfair (W).

However, it wasn’t just Amazon and online shopping that brought down Bed Bath & Beyond.

Walmart (WMT), Goal (TGT) and Costco (COST) has grown over the past decade, and they’ve been able to attract Bed Bath & Beyond customers with lower prices and a wider range of merchandise. Discount chains such as HomeGoods and TJ Maxx have also undercut Bed Bath & Beyond’s prices.

Without the differentiators of the lowest prices or the widest selection, Bed Bath & Beyond’s sales stagnated from 2012 to 2019.

Shoppers inspect cleaning supplies while shopping inside a Bed Bath & Beyond store in New York on April 13, 2011.

Then the pandemic hit in 2020. The company temporarily closed all of its stores while rivals deemed “essential retailers” like Walmart remained open. Sales fell 17% in 2020 and 15% in 2021.

Also, Bed Bath & Beyond has rotated through several different managers and turnaround strategies in recent years.

Former Target CEO Mark Tritton took the helm in 2019 with the backing of investors and a bold new strategy. He reduced coupons and inventory from national brands in favor of Bed Bath & Beyond’s own private label brands.

But this change alienated customers who were loyal to big brands. The company also fell behind on payments to suppliers, and the stores did not have enough goods to stock shelves. Tritton stepped down as CEO in 2022.

Power to avoid bankruptcy

Bed Bath & Beyond (BBBY)has been teetering on the brink of bankruptcy for several months.

In February, it was able to stave off bankruptcy by completing a complex stock offering that gave it both an immediate injection of cash and a promise of more funding in the future to pay down its debt. This offer was supported by the private equity group Hudson Bay Capital.

But Bed Bath & Beyond said last month it ended its deal with Hudson Bay Capital for future financing and turned to the public market to try to raise funds.

The company has also downsized to save money. It said earlier this year it would close about 400 locations but would keep open profitable stores in key markets.

And the company tried to save money by not paying severance pay to some laid-off workers at closed stores.

Bed Bath & Beyond laid off 1,295 workers in New Jersey this month, just days before a new state law took effect that mandates severance pay — equal to one week’s pay for each year of employment — for workers who lose their jobs.

However, all these moves were not enough to keep the once dominant chain out of bankruptcy.

And Bed Bath & Beyond is the latest retail chain to file for bankruptcy this year. Bankruptcies are piling up in the retail sector as interest rates rise and discretionary spending slows.

David’s Bridal, Party City, Tuesday Morning, mattress maker Serta Simmons and Independent Pet Partners, a pet store retailer, have filed for bankruptcy in recent weeks.

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