market watch | Jan 5, 2023 |
Bankruptcy looms for Bed Bath & Beyond

Last month, Business of Home’s retail columnist Warren Shoulberg flagged January 5 as a pivotal day for Bed Bath & Beyond. The day has arrived, and the news is bad. In reporting its preliminary third-quarter earnings, the beleaguered retail giant shared dismal numbers and issued two dire warnings: It likely will not have cash to cover expenses in the weeks ahead, and it is exploring bankruptcy. Wall Street took the news as one might think—the company’s stock plunged 25 percent, with shares nearing all-time lows at $1.81.

The news is shocking but not surprising. “The industry has speculated about the beginning of the end for a long time, and this is now much closer to the end of the end,” says Shoulberg. “It’s hard to look at this and see how they avoid bankruptcy.” (The Wall Street Journal has since reported that the company is preparing to file in a matter of weeks).

Bed Bath & Beyond’s woes stretch back for some time. Though the company’s revenue—and its stock price—got a much-needed boost during the thick of the pandemic home boom, the surge only papered over the cracks. The big-box retailer has long struggled to find its place amid a bifurcating retail landscape that tends to favor either super streamlined e-commerce players or elevated lifestyle brands. Bed Bath & Beyond is neither.

In recent years, the company’s troubles have accelerated. After a 2019 C-suite clean out, Target alum Mark Tritton was appointed to the CEO role and tasked with radically turning the company around, only to be ousted last summer as interim CEO Sue Gove was given the same challenge. Her plan, involving universal cutbacks and $500 million in financing, is only now coming to fruition, and it does not seem to have been big enough or quick enough to stop the bleeding.

What would a potential Bed Bath & Beyond bankruptcy look like? The good news is that huge retailers don’t tend to shut down overnight. “Anyone who is thinking Bed Bath & Beyond is going to close up shop next week is wrongheaded,” says Shoulberg. “These companies tend to come out of bankruptcy, they get new financing, somebody comes and takes over ownership and brings it back.”

For the company’s suppliers, the picture is muddled. Behind the scenes, many have either stopped shipping goods or shifted terms to weekly payment, indicating insufficient trust to extend credit. Some are owed large sums and, if the company indeed goes Chapter 11, may not recover that money. For the most part, the damage has already been done, and the fallout is unlikely to topple any big names. But small- and medium-sized suppliers will be hit harder, and there’s little doubt that whatever happens with Bed Bath & Beyond, its struggles will have ripple effects throughout the home goods retail industry.

Looking ahead, whether the company goes through a bankruptcy process, is acquired in distress, or is saved by a New Year’s miracle, any long-term future will require significant change. “After whatever happens happens, the big question is: Then what?” says Shoulberg. “Can management find a new reason for the company to exist? So far, no one has quite worked that out.”

Homepage image: ©Sundry Photography/Adobe Stock

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