Bed Bath & Beyond Inc announced that it has inked deals for more than $500-million in new financing and that it would close 150 stores, cut jobs and overhaul its merchandising strategy in an attempt to turn around its money-losing business.

Investors, however, remain concerned that the retailer’s plan, announced in a strategic update, will do little to improve Bed Bath & Beyond’s business as shares fell 25%. The retailer also announced a plan to raise money by issuing new shares.

The big-box chain – once considered a so-called “category killer” in home and bath goods – has seen its fortunes falter after an attempt to sell more of its own brand, or private label, goods. The COVID-19 pandemic, supply chain crunch and consumer pullback on shopping due to sky-high inflation also hit the chain’s sales.

Bed Bath & Beyond forecast a bigger-than-expected 26% slump in same-store sales for the second quarter and said it would retain its buybuy Baby business, which it had put up for sale.

The efforts to sell buybuy Baby had been encouraged by GameStop Corp Chairman Ryan Cohen, the company’s biggest investor until August when he sold out of his 9.8% stake, sending shares plummeting.

Executives said Bed Bath & Beyond is cutting about 20% of its corporate and supply chain workforce, and eliminating its chief operating officer and chief stores officer roles. The company has about 32,000 employees.

Top brass tried to reassure analysts that vendors were still supporting the company, a key indication of its long-term financial prospects. Suppliers will ask for more money up front or stop shipping goods if they believe retailers can no longer pay them. “As we have managed through our cash burn, we have seen changes in vendors we manage,” said CFO Gustavo Arnal, adding that the company is managing the situation “one by one.”

First-quarter sales plunged 25% and it lost $358-million, leading to the firing of its CEO Mark Tritton in June. The company hired Sue Gove, an independent board director, to replace him on an interim basis.

On August 31, Gove said the retailer was “continuing to see significant positive momentum” and intended to build its “deep heritage as a retailer.” “While there is much work ahead, our road map is clear and we’re confident that the significant changes we’ve announced today will have a positive impact on our performance’” she said on a conference call.

The retailer also said it expanded an existing loan and received a new $375-million “first-in-last-out” loan, and would launch a stock offering of up to 12 million shares.

Arnal said that 50 to 60 stores will be closed in a “first wave” heading into the balance of Bed Bath & Beyond’s fiscal year, which ends in February. The company has about 900 stores.

“They are running out of cash and desperately need to raise cash just to keep the business going,” said Jim Dixon, equity sales trader at Mirabaud. To improve its finances, the retailer said it would cut back on selling, general and administrative expenses by $250-million this year versus last year and rein in capital spending.

The company also estimates that comparable-store sales will drop 20% this year as it works through its transformation. “We are broadly satisfied that the measures announced today … will ease the pressure on the company, allowing it to continue trading,” said Neil Saunders, GlobalData’s managing director.

Bed Bath & Beyond Names Interim CFO After Executive’s Death

Bed Bath & Beyond Inc. named accounting head Laura Crossen as interim chief financial officer following the death of finance chief Gustavo Arnal, according to a regulatory filing. Mr. Arnal fell from a New York skyscraper on September 2 in what authorities later ruled a suicide.

Ms. Crossen, a two-decade company veteran, steps in to the interim CFO position a few months after she was named chief accounting officer at the home-goods retailer. She will keep her role as accounting chief and will receive a US$200,000 bump in base salary, Bed Bath & Beyond said.

Once known for providing shoppers with 20%-off coupons, Bed Bath & Beyond’s fortunes have declined in recent years after its moves to revamp shelves with more private-label products flopped with consumers. The chain is ditching that strategy to focus more on national brands, and last week said it would close 150 stores and cut jobs in an attempt to turn around its money-losing business.

The company and Mr. Arnal were sued on Aug. 23 over accusations of artificially inflating the firm’s stock price in a “pump and dump” scheme, with the lawsuit alleging Mr. Arnal sold off his shares at a higher price after the scheme.

GameStop Corp. chairman Ryan Cohen, who was Bed Bath & Beyond’s biggest investor until August when he sold his entire stake of 9.8%, was also named in the lawsuit. A representative for Mr. Cohen’s firm, RC Ventures, was not immediately available for comment.

Pengcheng Si, the lead plaintiff in the August lawsuit, declined to comment on the litigation.

The retailer said last week it was “in the early stages of evaluating the complaint, but based on current knowledge the company believes the claims are without merit.”

“This [lawsuit] is just the opening salvo,” Jacob Zamansky, securities arbitration lawyer at Zamansky LLC, told Reuters. He is not connected to the case. “Whenever there is a large drop like this it is highly likely a big pension fund will come and file a similar lawsuit … and take over the case,” he added, referring to the share price.

Nuveen LLC, the New York State Teachers’ Retirement System and the California State Teachers’ Retirement System are some of the top pension funds holding stakes in Bed, Bath & Beyond.

Shares of the company, a favourite among so-called meme stocks, were down 18% at US$7.08 on the afternoon of September 6. And its bonds were also quoted slightly lower early that same day.

The 3.749 per cent August 2024s were quoted at 38-43 cents to the dollar compared with around 40-42 on September 2 while the 4.915 per cent August 2034s were at 20-24 cents to the dollar versus 22.5-25.5 on September 2, according to an investor who declined to be named.

 

Source: Globe and Mail
Source: Retail Drive
Source: Globe and Mail
Source: Globe and Mail
Source: The Star
Source: Financial Post