Bed Bath & Beyond Inc said it is seeing early signs that efforts to clear excess inventory are working and it expects its cash flow to break even in the fourth quarter, even as it reported a bigger-than-expected second-quarter loss.

“Of the owned brand inventory that we targeted and was comprised in our reserve, we’ve made headway in Q2 through about 1/3 of that inventory,” interim chief financial officer Lauren Crossen told investors.

Bed Bath said its current liquidity is $850-million. The company burned through $325-million in the reported quarter. Analysts at UBS have estimated that Bed Bath will burn through $1.5-billion in cash over the next eight quarters.

Enhancing liquidity is critical for Bed Bath as it works to put $500-million in new financing into its turnaround efforts by opening new buybuy Baby stores, cutting private-label brands, offering more in national vendors such as Caphalon and closing more than 150 Bed, Bath and Beyond stores.

Crossen said the timing of continued progress depends on a “variety of factors,” including the store closures. If the company is unable to break its leases and faces push-back from commercial landlords, rent payments, labor costs and possible lawsuits could cause more financial woes. The company has also stopped remodeling stores and opening Bed Bath-branded locations to save on capital expenditures.

The big-box chain now aims to attract more consumers by dishing out its popular 20% off coupons, as its customers look for variety and value, Bed Bath and Beyond interim chief executive Sue Gove said. Bed Bath has a mountain to climb, with people spending less on home goods and furnishings.

Bed Bath has also made progress in paying its suppliers following reports that vendors had restricted or stopped shipments due to delayed payments. “Working with our supplier partners remains an important focus area and I’m pleased to share that our payables are considerably healthier than in the prior quarter as evidenced on our balance sheet,” interim CEO Sue Gove noted.

While the retailer said it is seeing progress in its merchandising and inventory changes, some analysts are skeptical that the retailer’s strategies are sustainable. Neil Saunders, managing director of GlobalData Retail, said of Bed Bath’s plan: “It isn’t particularly compelling, and it will take significant time to enact. To be fair, some progress has been made on reducing inventory levels, but we suspect this has been driven by extreme markdowns and write-offs, and there is likely to be further pain on this front before ranges normalize,” Saunders said.

Bed Bath reported revenue of $1.43-billion, missing Wall Street estimates of $1.47-billion. The company’s net loss was $366.2-million, or $4.59 per share, for the second quarter, compared with a loss of $73.2-million, or 72 cents per share, a year earlier. Excluding items, Bed Bath lost $3.22 per share, compared with estimates for a loss of $1.85.

Source: Globe and Mail
Source: NBC News
Source: BNN Bloomberg
Source: Retail Drive