Bed Bath & Beyond posted a worse-than-expected loss of $393 million in the third quarter ended Nov. 26 — pushing losses for the fiscal year to more than $1.1 billion. Sales fell 33 percent from the same three-month period last year.
“What we’re seeing is a troubled situation, and it’s really been a long time coming,” said Neil Saunders, chief executive of research firm GlobalData. There has been a “gentle erosion of customers … year in, year out.”
Student, 20, earns $110 million from trading meme stock Bed Bath & Beyond
In an earnings call Tuesday, CEO Sue Gove said the company is working with a team of advisers who look to cut costs by $80 million to $100 million. It continues with plans announced in August to close 150 stores and has said an undisclosed number of layoffs are underway.
“I don’t think it’s going to be enough to rebalance the book because the losses are just terrible and they’re still in these dire straits,” Saunders said.
Gove did not say a Chapter 11 filing – which allows troubled companies to save themselves through a debt restructuring – was definitive. On Friday, a company spokesperson said in a statement to The Washington Post that “multiple avenues are being explored and we are determining our next steps thoroughly and in a timely manner.”
But a public acknowledgment generally means there’s no turning back, said Patrick Collins, a partner at the New York-based law firm Farrell Fritz who concentrates on bankruptcy and corporate restructuring.
“It’s going to be inevitable,” Collins said. “Because if you’re a supplier and you hear that, you’re no longer going to give credit to Bath Bath & Beyond – you’re going to insist on collection.”
If there is 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 the bankruptcy process.
Cohen added that there is an even chance for the company’s headed straight for liquidation through a Chapter 7 filing.
“Absent a suitor who either buys the company or injects the company with some kind of very visible cash, or gets involved in the company’s debt and takes it into a prepackaged bankruptcy — the company is toast,” Cohen said.
“A Terrible, Terrible Mistake”
Founded in 1971, Bed Bath & Beyond was one of the first major brands dealers in special shop space. It became the destination for household items, small kitchen appliances, wedding registries and college dorm supplies. But business began to cool in 2010, Saunders said, as Amazon, Wayfair, Walmart, Target and other brands bolstered their home improvement lines. (Amazon founder Jeff Bezos owns The Washington Post.)
Meanwhile, the company experienced some shortfalls, such as the purchase of One Kings Lane for $12 million in 2016. Bed Bath & Beyond sold the online home furnishings company in 2020.
Mark Tritton, who took over as Bed Bath & Beyond’s CEO in 2019, moved to revamp the retailer’s private-label home brand — trying to replicate the success he had as head of merchandising at Target. He shifted focus and resources, but the investment didn’t pay off, Cohen said.
He made other bad decisions before being replaced by Gove last June, Cohen said, including leading a $1 billion share buyback.
“Whether he did it because he didn’t know what he was doing or he was pressured into it, it was a terrible, terrible mistake,” Cohen said.
And with most of its competitors struggling with excess inventory, Bed Bath & Beyond was a mixed bag. Saunders said the supply chain operations were poorly managed. Some shelves were crammed to the brim while others were bare. And coupons, almost synonymous with Bed Bath & Beyond, became a necessary evil. The discounts became a burden on the company’s bottom line, but were also what brought in customers.
“It takes a long time to change a customer’s focus, let alone pull the needle on these millions of ‘X’ percent off coupons that had been sitting in people’s mailboxes for years,” Cohen said.
The age of free online returns is over
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 – It failed to capitalize on the momentum, Saunders said. As the economic climate changed, stubbornly high inflation cut into Americans’ discretionary purchases. This took a toll on most retailers, but “Bed Bath & Beyond fell in a way that no other retailer had seen,” Saunders added.
Foot traffic has fallen sharply – down 26.5 percent in December, year-on-year, according to the research firm Placer.ai.
“Customers don’t easily eat at empty restaurants, they don’t easily go to empty malls, and they certainly don’t shop stores with empty shelves,” Cohen said.
Over the past four months, as news of Bed Bath & Beyond’s dwindling cash and poor performance spread spread, many suppliers decided it was too risky to provide the company’s product on credit. If bankruptcy is filed, there’s a good chance they won’t get paid.
The chain seems to have few other options. Experts say the best option is to file for Chapter 11 protection or find an interested party to buy the debt.
“I guess there are vultures out there who are considering or have considered swooping in and basically taking control of the company through its debt, through its debt and other debt,” Cohen said.
But this has to come at an “absolute bargain, knockdown price,” Saunders said.
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 in play.
In a statement to The Post, the retailer declined to talk about potential sales. “We do not comment on speculation of this nature.”
The company’s shares plunged 30.1 percent after the report, to $3.66, ending a fiery five-day rally that drew comparisons to Bed Bath & Beyond’s wild meme-stock-fueled ride over the summer. It surged more than 350 percent in August, driven largely by online message boards.
Saunders doubts that Bed Bath & Beyond can pull off a turnaround if the company files for bankruptcy. It is too focused on staying afloat rather than creating a long-term strategy, he said.
“The problem is – you save a ship from sinking, that doesn’t mean you have a seaworthy ship,” Saunders said. “You only have a ship that you prevented from sinking. But you’re still at real risk of going below the deep end in the future.”