Trying to predict the fates and fortunes of retailers is a perilous pursuit these days, but it’s looking more and more like the downward-spiraling Bed Bath & Beyond will not be able to escape a bankruptcy filing in 2023.
A date to watch will be January 5, 2023, when the beleaguered big-box chain reports the results of its third quarter, which covers the period from late summer through the end of November. So far, there have been no statements from the company on how it fared—but confidential reports from suppliers, industry observers and store visits indicate that the period in question will continue the retailer’s recent pattern of sharp same-store sales declines and serious bottom-line losses.
In a report earlier this month, Jefferies analyst Jonathan Matuszewski was particularly negative, lowering Bed Bath & Beyond’s comp store sales estimate from a 15 percent decline to a more devastating 23 percent drop. “Management indicated that the quarter-to-date trend through September had not changed materially from the fiscal second quarter, though we now believe it has weakened as the quarter progressed with sustained pressure in November,” he wrote. He also forecast worsening gross margin numbers and ongoing negative comps for fiscal 2024, stretching into the middle of that calendar year.
Sadly, he wasn’t the only one with bad news. “We continue to believe Bed Bath & Beyond will have a hard time driving customers to its stores,” wrote Goldman Sachs analyst Kate McShane, “especially in the second half given the amount of competition we expect in the home goods category.”
In late November, research company DataWeave reported that Bed Bath & Beyond was having serious inventory challenges, with as much as 40 percent of its product out of stock. According to Seeking Alpha, suppliers “are reported to have paused shipments until they get paid for previous orders.”
Several of the company’s key suppliers, contacted confidentially by Business of Home, said they were continuing to ship to the retailer as long as their accounts receivable were current; several smaller vendors, meanwhile, reported they had stopped shipping to the company or were not accepting new orders, concerned that they would not get paid.
In previous public statements, Bed Bath & Beyond president Sue Gove has asserted that the company’s payables were in as good a position as they had been in some time, and that it was continuing to work through the situation. Over the past few months, the company has pushed to raise additional capital through new stock offerings and debt-for-equity swaps, but reports have indicated these have not been as successful as the retailer had hoped, causing it to extend the period.
Visits to stores in several market areas continue to show them light on both inventory and customers, particularly as the holiday shopping season ramps up. And while those reports are purely anecdotal, numbers from the store-traffic monitoring organization Placer.ai confirm the worst: In October—which are the most recent numbers available—Bed Bath & Beyond’s foot traffic was down 22.7 percent for the month, a little better than some months, but worse than others. In fact, Placer says there haven’t been foot traffic gains all year.
Should Bed Bath & Beyond’s third-quarter results be in-line with these negative forecasts, it’s unclear what happens next. The retailer may still have enough access to funds and credit to remain solvent for at least another quarter or two at that rate of losses. But if more vendors decide to cut them off and stop shipping, that alone could speed up bankruptcy, as it has for many other retailers in similar situations.
While the rest of us will be packing up the ornaments and returning unwanted gifts during the first week of January, for Bed Bath & Beyond there could be one big lump of coal yet to be unwrapped.
Homepage image: ©John Mantell Photo/Adobe Stock
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.