Bed Bath & Beyond Reports Bigger Quarterly Loss as Bankruptcy Threat Looms
- Bed Bath & Beyond reported that third-quarter net sales fell 33% year over year to $1.3 billion, while comparable sales declined 32%. By banner, Bed Bath & Beyond comps fell 34% and BuyBuy Baby comps fell “in the low-twenties percent range,” according to a company press release.
- Operating loss swelled by more than 423% from last year to $450.9 million, while net loss grew by 42.2% to reach about $393 million.
- The company reiterated that it is currently exploring strategic alternatives for the business, which it said last week included a potential bankruptcy filing or sale.
Bed Bath & Beyond’s dismal third-quarter earnings report comes after the company issued a “going concern” warning based on recurring losses, negative cash flow from operations, and its current cash and liquidity projections.
At the start of the third quarter, the retailer introduced a turnaround plan that included closing more than 150 underperforming stores, laying off staff and discontinuing some of its private labels as it realigns its inventory in favour of national brands. However, inventory constraints stymied progress on those plans and negatively impacted Bed Bath & Beyond’s financial performance.
“Following some of the micro- and macro-economic challenges we, and the sector, faced at the beginning of the quarter, we experienced an acceleration in vendor payment terms and credit line constraints. This led to lower receipts and therefore lower in-stock levels in the 70% range, which hampered our sales further in an already competitive environment,” CEO Sue Gove said on a call with analysts on January 10.
While the home goods market has softened after early pandemic highs, analysts point to other areas of concern for Bed Bath & Beyond. According to GlobalData research, the retailer’s sales have declined by 54.4%, or $1.5 billion, over the past three years.
“The perpendicular nature of this drop cannot be blamed solely on market forces nor on competition, it also needs significant doses of negligence and misjudgment. Sadly, Bed Bath & Beyond had both things by the bucket-load thanks to a botched reinvention program and a complete lack of commercial understanding,” GlobalData Managing Director Neil Saunders said in emailed comments.
Bed Bath & Beyond also reported declines across its channels: In the third quarter, comps fell 31% in its stores and 33% in its digital business. According to foot traffic analytics firm Placer.ai, store visits in December 2022 were down 26.5% year over year and in November 2022, they were down 23.1% compared to the year-ago period.
As Bed Bath & Beyond eyes strategic options, bankruptcy or a sale of all or some of its assets — similar to what Pier 1 pursued — is most likely, according to Saunders. “Whatever path Bed Bath & Beyond determines, it will not be the final resolution to this saga. It will be just the beginning of many more months or turmoil and disruption,” Saunders said.
Bed Bath & Beyond Warns It May Go Out of Business
Bed Bath & Beyond Inc. said it might not be able to continue as a going concern, bringing another United States retail chain to the precipice of bankruptcy. The Union, N.J.-based company said it’s pursuing an array of strategic alternatives, including restructuring debt, selling assets or filing for bankruptcy-court protection, but “these measures may not be successful.”
The company is continuing to pursue steps to improve its cash position, it said in a filing on January 5, but its recurring losses and negative cash flow in the nine months ended Nov. 26 leave “substantial doubt” that the company can stay in business.
Bed Bath & Beyond called off a planned debt exchange in connection with the warning. It had offered creditors the chance to swap unsecured bonds for a lower face value amount of new secured obligations in order to trim the company’s overall debt load.
Following the announcements, Bed Bath & Beyond’s bonds fell to new lows. Its 2024 notes traded down to 21 cents U.S. on the dollar, from around 23 cents U.S. January 4, and its 2034 notes fell to eight cents U.S. on the dollar, from around 10 cents U.S., according to Trace. A company spokeswoman didn’t immediately respond to a request for comment beyond the filing.
Bed Bath & Beyond warned that it expects to report third-quarter revenue of US$1.259 billion, below the US$1.404 billion analysts had estimated.
“Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints,” Bed Bath & Beyond chief executive Sue Gove said in a statement. But, she added, “we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors. We have seen trends improve when in-stock levels have increased.”
Some suppliers had begun to halt shipments to the retailer in recent months, concerned about the company’s outlook. That aggravated the already tenuous financial situation facing the company. The retailer — for decades a mainstay of malls and shopping centres around the U.S. — was plagued by years of management missteps and a dysfunctional corporate culture that left it ill-equipped to compete against Amazon.com Inc. and other online retail juggernauts.
During the pandemic, the company increased its offering of private-label products — a change that kept many loyal customers away. Earlier this year, as part of a broader strategic shift, Bed Bath & Beyond said it was pivoting back to selling well-known national brands such as Oxo, Ninja and SodaStream, but many shoppers had already stopped turning to the company for products.
Shares of Bed Bath & Beyond fell as much as 30.3% during trading on January 5. The stock had already lost more than 83% of its value since the end of 2021.