Highlights:

  • Bed Bath & Beyond has announced plans to close all of its Harmon beauty product stores and 87 more of its Bed Bath & Beyond stores. The closures announced add to plans announced in the summer of 2022 to close about 150 Bed Bath & Beyond stores.
  • Bed Bath & Beyond received a notice of default from JPMorgan Chase, which is calling for an immediate repayment of debts under the credit agreement.
  • Bed Bath & Beyond also failed to make interest payments on its bonds. After missing the deadline, the company now has a 30-day grace period to make payment, the company confirmed to Retail Dive.
  • On February 7th the company said it’s attempting to raise more than $1 billion by offering preferred stock, along with warrants to purchase shares of preferred stock and common stock. The company said it expects to initially raise about $225 million. Hudson Bay Capital Management is the main investor in the share sale, Bloomberg reported.
  • In a securities filing, the company said the cash infusion is needed “to operate our business” and pay debts. Without it, Bed Bath & Beyond “will likely file for bankruptcy protection.”
  • The company also named Holly Etlin as its interim chief financial officer, replacing Laura Crossen, who held the role since September, following the death of CFO Gustavo Arnal. Etlin has 30 years of turnaround experience, including serving as the chief restructuring officer at Tailored Brands and as partner and managing director at AlixPartners.
  • Late on February 7th the company announced that it secured about $225 million through a stock offering. 

Insights:

A cash infusion appears to have pulled Bed Bath & Beyond back from the brink of imminent bankruptcy.

The retailer announced late on February 7th that it secured about $225 million through a stock offering. Bed Bath & Beyond is expecting to earn an additional $800 million in stock-related proceeds over time. The company also plans to draw $100 million from a first-in-last-out loan. If all the anticipated earnings come to fruition, the company would raise just over $1 billion.

“This transformative transaction will provide runway to execute our turnaround plan,” CEO Sue Gove said in a statement. The cash will enable the retailer to immediately repay its outstanding debt, the company said in its statement. One of the company’s outstanding debts includes a $28 million missed interest payment that was due Feb. 1, according to The Wall Street Journal.

Analysts with Wedbush, led by Seth Basham, said in a note that the company’s ability to secure financing is “against the odds” and reduces the short-term risk of bankruptcy. “However, this lifeline comes at an incredible cost to existing shareholders who could see over 80% dilution from convertible preferred shares and warrants if fully executed,” the analysts said.

Bed Bath & Beyond’s turnaround plan also includes shrinking its store footprint even further. The retailer already announced 150 store closures last year and an additional 87 closures in January. By the end of its downsizing, Bed Bath & Beyond will have reduced the footprint of its namesake banner by more than half since the start of 2022. Ultimately, the company expects to operate about 360 Bed Bath & Beyond stores and 120 BuyBuy Baby stores. Last month, the company announced the closure of its entire Harmon beauty chain of about 50 stores.

The company had 771 Bed Bath & Beyond stores last year, according to regulatory filings.

Bed Bath & Beyond also said it plans to streamline and realign its infrastructure and operations. As part of that strategy, Gove said the company will prioritize the availability of national and emerging direct-to-consumer brands. “As we make important strategic and operational changes, we will continue to take disciplined steps to enhance our cost base and improve our financial position,” Gove said.

The company said it plans to retain its most profitable and geographically well-positioned stores. Digital is expected to grow as a result, and Bed Bath & Beyond expects profitability in that channel to improve as well. 

Source: Globe and Mail
Source: Retail Drive
Source: Retail Drive
Source: Retail Drive
Source: Retail Drive
Source: Retail Drive