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Is Bed Bath & Beyond nearing the end of the line?
Bed Bath & Beyond (BBBY) will file for Chapter 11 bankruptcy protection within a matter of weeks, according to reports from numerous news outlets.
The reporting, based on discussions with individuals familiar with the retailer’s plans, says that BBBY is in the planning stage prior to a formal Chapter 11 filing.
BBBY lent credence to the accounts with a business update issued yesterday that said “recurring losses and negative cash flow” raise “substantial doubt” about its “ability to continue as a going concern.”
A company spokesperson said “no determinations” have been made on what the retailer will do next.
BBBY said it expects to report sales of roughly $1.259 billion for its fiscal third quarter, which ended Nov. 26, compared to $1.878 billion the year before. BBBY expects to post a net loss of $385.8 million for the quarter compared to its loss of $276.4 million a year earlier.
“Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macro-economic challenges,” said Sue Gove, president & CEO of BBBY, in a statement. “Reduced credit limits resulted in lower levels of in-stock presentation within the assortments that our customers expect.”
Ms. Gove said that the retailer was able to improve its liquidity during the holiday season and is working on its stock levels. “We have seen trends improve when in-stock levels have increased,” she said.
“Strengthening our ability to serve our customers will continue to drive our decision-making. We are resetting foundational elements to create a stronger and more nimble infrastructure that aligns closely with customer demand and preference,” said Ms. Gove. “We continue to manage our financial position amidst a changing landscape and work with expert advisors as we consider all paths and strategic alternatives to accomplish our short- and long-term goals.”
Ms. Gove said that the company would further update stakeholders next week on its third quarter earnings call.
“Our employees and partners are our top priorities. Our unwavering engagement with our supplier community will continue as we work together to realize our full potential. We are a team focused on the future and I am grateful for the dedication and hard work of those who are powering our path forward. We will continue to steer our business dynamically to ensure Bed Bath & Beyond, buybuy BABY and Harmon remain destinations of choice for customers well into the future.”
- Bed Bath & Beyond Prepares to File for Bankruptcy Within Weeks – The Wall Street Journal
- Bed Bath and Beyond says it may not survive – CNN
- Bed Bath & Beyond shares plummet after company warns of potential bankruptcy – CNBC
- Bed Bath & Beyond Warns of Potential Bankruptcy – The New York Times
- Bed Bath & Beyond Inc. Provides Business Update – Bed Bath & Beyond Inc.
Discussion Questions
DISCUSSION QUESTIONS: Will the current plan in place under Sue Gove enable Bed Bath & Beyond to avoid falling into bankruptcy? What is your prognosis for the retailer should it file for Chapter 11 protection?
Poll
Loading …BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Carol Spieckerman
President, Spieckerman Retail
Bankruptcy now appears to be inevitable. The challenges Bed Bath & Beyond is facing are too significant and they have run out of time. Bankruptcy will provide additional time for the company to re-set or potentially wind-down completely. There are plenty of examples of companies that have re-emerged from bankruptcy, but it’s going to be a long, painful road for Bed Bath & Beyond management, customers and especially their employees who have dedicated their careers to this enterprise.
The best thing Bed Bath & Beyond can do now is rip off the bandage and get it over with. To take any other route will only delay the inevitable.
The current finanicials and underlying market conditions don’t look favorable for Bed Bath & Beyond. I would expect them to announce Chapter 11 sooner than later because it will give them a pathway to radically alter their current trajectory. Ms Gove walked into a firestorm thanks to her predecessor, and it’s going to take bold moves and tremendous leadership to pull out of this tailspin.
The store looked exactly as described here during the holidays. Frankly, it was sad to see. When your suppliers are not giving you product and your shelves are truly empty not through customers pulling the items off the shelf but sheer OOS, it is not a good picture. If you wanted to buy a cushy Koolaburra (ugh) throw blanket, they had end-of-aisle displays throughout the store. If you wanted to buy a coffeemaker or other small appliance (perfect gift for the holidays) — that was a no go. The mistakes made with their Welcome Rewards program simply reinforce their dysfunction.
I mean, let’s be real — this was in the cards since before the pandemic. And then they had that temporary lifeline of being a meme stock and being in the spotlight from Ryan Cohen’s investment, but at the end of the day (and maybe this is the key word of 2023), there have to be fundamentals there and, at Bed Bath & Beyond, that clearly has not been the case.
It appears that bankruptcy may be unavoidable at this point. While that will no doubt be painful, hopefully Bed Bath & Beyond can take advantage of the process to find ways to emerge leaner, healthier and perhaps with a laser focus on locations, channels and assortments that drive margins.
When I saw this news yesterday, it occurred to me that CEOs of apparently troubled companies should read RetailWire. For years we have dissected reports of the great things they were going to do as the situation worsened.
Again, we are seeing this grand plan for a turnaround and avoiding Chapter 11. It may be a couple of years before we finally bury Bed Bath & Beyond, but we can write the obituary now. Bed Bath & Beyond is well beyond being saved by “more productive merchandise plans and improved execution.”
We have certainly had many RetailWire discussions about Bed Bath & Beyond and whether or not they could create a viable and sustainable business strategy. Despite efforts of Ms. Gove to right the ship, Bed Bath & Beyond has been taking on water and is sinking quickly. I’m not certain that her current plan is not yet another bandage on something that requires major surgery.
If the retailer could articulate their purpose and focus on a handful of key differentiators, filing Chapter 11 protection could give them breathing room for recovery. But the headwinds may simply be too strong.
Bed Bath & Beyond’s announcement likely signals a downward spiral for several reasons. Even though Bed Bath & Beyond toyed with category expansion over the years – those “beyond” pieces of the business were always on the sidelines. Bed Bath & Beyond, at its heart, is a home goods category-killer. Category killing was a great model until it wasn’t. High-margin home goods have been in retailers’ sites for several years and only accelerated during the pandemic. Amazon, Walmart, Target, dollar stores, off-price retailers, and even major grocers have been attacking the category with private brand development proliferating along with it.
Bed Bath and Beyond was stuck between attempting to be a brand under Tritton’s leadership and returning to just being a place that has brands as Sue Gove’s strategy swung back to courting national brands. The shift back to national brands is particularly perilous and ill-timed now that Bed Bath & Beyond can’t pay its suppliers. Major brands have options as so many retailers have doubled down on home goods so the incentive to take risks with Bed Bath & Beyond is low. This is particularly true as major retailers canceled billions of dollars in orders prior to the holidays to remedy inventory pile-ups. Suppliers are quite risk-averse going into 2023. Even if Bed Bath & Beyond were to fill its shelves with well-known brands again, it would be carrying the brands everyone else has. Bed Bath & Beyond would still be just a place that has brands, and it would be a continual race to the bottom on price. Retailers and e-tailers that are cheaper and more convenient will get the sale.
As Bed Bath & Beyond simultaneously shuts down stores, the brand recognition and site-to-store convenience that drives its online business are severely compromised. Bed Bath & Beyond sells home goods – that’s it. The death of the strip center category killer, lack of diversification, national brand ubiquity, and the convenience factor, are insurmountable. When you add it all up, you could even say that Bed Bath & Beyond has had a pretty good run as one of the few remaining legacy category killers.
Not particular to Bed Bath & Beyond but certainly applicable to them, once a company reaches a certain velocity of decline it is very difficult to recover. Reducing the cost of excess real estate and inventory is not a short-term correction. Just in my area, the four local stores were more than the local population could support. The costs and time required to re-organize can be more than is available, as other retailers (even Amazon!) are seeing declining sales and projections of recession are increasingly common. Chapter 11 will give Bed Bath & Beyond some protection and a little time, but a failing business model coinciding with a global recession will make it a very difficult challenge.
Sadly, bankruptcy has been the inevitable destination of Bed Bath & Beyond for quite some time. The turnaround plan was sensible, but lacked any oomph or detail on how the company was going to differentiate to compete. Too much rot has set in, too many customers have been alienated and lost, and there is far too much debt sitting on the company’s balance sheet. And on top of all of this, the consumer economy in the home retail market is very soft. When the cards are stacked against you, sometimes you just need to fold.
If the company can find DIP financing, now’s the time. It has as much cash on hand as it’s going to have, and if it can come up with a plan (I have my own ideas), it could work out. Smaller stores, narrower assortments in specific categories — that could work.
But again, now’s the time!
The inevitable outcome is obvious. They are saying it themselves, just in the most obscure and veiled language possible.
I received a lot of advertising for Bed Bath & Beyond stores over the holiday season. I went in and saw very few customers in their stores. We had discussed this earlier last year and came pretty much to the same conclusion. All the differentiation with the remodels and addition of private label lines did not move the needle. I don’t know if they are left with many options other than this one.
Other retailers (Macy’s, for one) have survived Chapter 11, but I’m not sure about Bed Bath & Beyond. It’s one thing to be debt-ridden (and to restructure that debt), it’s another thing to have a meltdown in your sales volume.
A bankruptcy filing may allow Bed Bath & Beyond to close more than its previously announced 150 stores, and it may allow critical supplies to start shipping goods again. Without getting branded inventory back on the shelves, the company’s long-term prognosis is not good.
Bankruptcy appears to be inevitable for Bed Bath & Beyond. The retailer has faced significant disruption, and Bed Bath & Beyond’s brand equity has taken a major hit as they fight to remain relevant in an increasingly competitive marketplace. This once-dominant retailer has struggled significantly to regain market share in a landscape dominated by Walmart, Amazon, and Target and resonate with the next generation of connected consumers.
Customer expectations and retail have shifted significantly since Bed Bath & Beyond’s heyday. Rick Watson and I discussed how Bed Bath & Beyond could potentially mount a comeback in a recent Rethink Retail podcast. Sadly, the situation at Bed Bath & Beyond is even more dire than when we recorded this podcast a month ago.
Maybe there’s a Beyond for Bed Bath & Beyond, but it certainly isn’t in the big box specialty category business, competing pretty much head-on with Amazon. Might as well get on with possible transformations and rebirth on its own timeline, rather than that of its creditors.
It may be time for BBBY to surrender. It appears the so called turnaround plan is not working. However, it is worthy to note that our businesses do not cause the downfall of a competitor. Rather, it is customers that close businesses. I find BBBY’s statement, “Our employees and partners are our top priorities,” strange. What happened to customers?
If the company itself seems to have little optimism, then who am I to argue? The few small positives here do little to offset the enormous negatives; downturns seek out the vulnerable first, and there’s little doubt BBBY fits that description. Chapter 11 strikes me as a pointless waste of resources; liquidation would be painful to employees and those who enjoy shopping there, but there don’t seem to be many of the latter left, anyway.