Photo: Unsplash | Melinda Gimpel
Who Wins From Bed Bath & Beyond’s Bankruptcy?
Bed Bath & Beyond Inc. yesterday said that it had filed for bankruptcy under Chapter 11 to wind down its business and seek a sale of its assets.
The company will use $240 million in debtor-in-possession financing, upon bankruptcy court approval, to help support its operations during the process.
Bed Bath & Beyond’s 360 namesake stores and 120 Buybuy Baby locations and their websites will remain open as part of the liquidation process. The retailer said it would meet its commitments to customers, employees and vendors by honoring gift cards, paying wages and benefits, and honoring its obligations to its trading partners.
“Millions of customers have trusted us through the most important milestones in their lives – from going to college to getting married, settling into a new home to having a baby. Our teams have worked with incredible purpose to support and strengthen our beloved banners, Bed Bath & Beyond and Buybuy Baby,” said Sue Gove, president & CEO of Bed Bath & Beyond Inc. in a statement. “We deeply appreciate our associates, customers, partners, and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders.”
Bed Bath & Beyond’s plans to seek a sale of some or all of its assets under Chapter 11 is not a surprise. It has been widely speculated that the retailer would need a new owner to keep its business going after it issued a business update in January that said “recurring losses and negative cash flow” raise “substantial doubt” about its “ability to continue as a going concern.”
The company said it “will pivot away from any store closings” should a bidder or bidders arise during the bankruptcy process. Bed Bath & Beyond leadership “believes this dual-path process will best maximize value.”
It could be that Buybuy Baby will receive the most interest among Bed Bath & Beyond’s assets.
There were reports a year ago that Bed Bath & Beyond was considering a sale of Buybuy Baby under pressure from activist investor Ryan Cohen, Chewy co-founder and chairman of GameStop.
Cerberus Capital Management and Tailwind Acquisition, a firm chaired by former Casper Sleep CEO Philip Krim, were reported by The Wall Street Journal as having expressed interest in possible deals to acquire the baby products chain.
Discussion Questions
DISCUSSION QUESTIONS: How likely is Bed Bath & Beyond Inc. to find a buyer for its namesake business and/or Buybuy Baby while in Chapter 11? Who will benefit most should Bed Bath & Beyond and Buybuy Baby go out of business?
Poll
Loading …BrainTrust
Carol Spieckerman
President, Spieckerman Retail
Cathy Hotka
Principal, Cathy Hotka & Associates
This brand has been terribly damaged, but no doubt the vultures will be looking to pick at the carcass. While there may be something to salvage, to a great extent this brand is dead. A sad conclusion to an outcome that was predictable, and a cautionary tale for other retailers. There is no good that comes from the catastrophic failure of a major retail brand — except, perhaps if you’re a competitor. But what gets lost in headlines about stock prices, legal quagmires, unpaid suppliers and insurmountable debt are the people. In 2019, they had 62,000 employees–as of February, 2022 it was 32,000 and soon it will be zero.
The spoils of Bed Bath & Beyond will be spread over quite a few players. One of the main beneficiaries is Target, simply by virtue of the fact that the store and customer overlap between the two retailers is strong. Target has taken quite a bit of market share from Bed Bath & Beyond over the past few years. Other winners include HomeGoods (which already has plans in place to try and take share), Walmart, Amazon, Wayfair, Best Buy (for some electronic home goods), and to a certain extent IKEA.
It better be sold to an executive or group that knows this business and knows what it’s doing! We have had enough of the others.
Agree with Mark Ryski — stick a fork in them, the brand is done. Amazon, Target, and Walmart have already benefited from their poor management (something we’ve talked about in this space). Nobody in their right mind would buy the brand now.
Although the slew of pure brand marketing companies that used to dot the landscape have winnowed, WHP could be a contender. The company’s recent acquisition of Bonobos would seem to have signaled an all-systems-go phase after it digested the “R” Us assets. Buybuy Baby and Toys “R” Us/Babies “R” Us would be a synergistic pairing and Bed Bath & Beyond would be a nice category expansion play that would diversify WHP’s apparel-heavy holdings.
The uncomfortable truth is that a lot of specialty retail is no longer needed. Customer reviews have replaced curation. I would expect that Target and Walmart will benefit the most, and we haven’t seen the end of the disruption of weaker brands.
Exactly Cathy.
It strikes me that category killers, as a class of retailers, are more vulnerable to business failure. With certain exceptions, say an REI or Home Depot where you are accessing expertise and product, consumers just aren’t as attracted to the value propositions that supported giant office supply stores, mega-bookstore and music chains and other so-called category killers.
Chapter 11? This has Chapter 7 written all over it.
How long have we been writing about the demise of this retailer? The one thing that stands out for me is that during this slide, management tried to fix the business with marketing Band-Aids–and not very big ones at that. When the ceiling is falling in, a 20 percent coupon will not save you.
As with all bankruptcies the lawyers and banks win with fees, but that’s not what you meant.
It really depends on the category. Small appliances will get divvied up between Target and Macy’s. Bedding between Macy’s, Target and JCP (yes, really). Bridal registry, etc. goes to Macy’s.
And whoever buys the carcass (someone like Authentic Brands) will grab the brand name and try to bring it back from the dead.
The winners from this bankruptcy will be any retailer that can learn from Bed Bath & Beyond’s missteps of the last several years. Dollars invested in stock buybacks (over $10 billion?) versus investing directly into the evolution of the business (Target). Hiring a talented executive from Target and then watching that executive try to do too much too fast (shades of JCP and Ron Johnson). Bed Bath & Beyond had carved out a niche for themselves and served the market well for a long time. I for one preferred shopping there versus Target or Walmart. Better assortments with better presentation. But in their absence I will make do by shopping at the competitors that live on–the competitors that did a better job of managing their evolution.
There will be several winners in the bankruptcy. Bed Bath & Beyond has a significant number of very sought-after locations that will be cherry picked regionally and nationally. The store brand has been damaged badly and has a customer base that is addicted to coupon-driven discounts. However the online brand will have some legs and probably be bought by a similar retailer. Additionally, retailers struggling with a tight store and home office talent pool may benefit from having an experienced work force to augment their teams.
The current state of Bed Bath & Beyond was caused by the sum total of many small missteps. At any any point during the past few years they could have turned the company around via several routes. But they failed at each opportunity to evolve. They could have leveraged their strong community presence of brick-and-mortar stores for shop-in-shop partnerships with strong DTC brands — similar to the Best Buy model. They attempted to partner with Kroger, but had no clear strategy and put almost no effort into positioning this for the shopper, so it never had a chance. Without a change in leadership, in business model, in supply chain, or in customer experience — basically everything at this point — I see total change in ownership as the only alternative to liquidation.
The disruption that Bed Bath & Beyond has experienced has had an extreme impact on its brand equity. A brand that was once the omnipresent leader in the home goods category became, over the past three years, a cautionary tale for retailers who failed to adjust their operating model to meet rapidly changing consumer preferences. Amazon, Target, Walmart, and many other brands have overtaken this former category leader’s position.
Unfortunately, Bed Bath & Beyond now joins the Circuit City, Toys “R” Us, RadioShack, and Blockbuster amid the ranks of companies that once had a dominant position, with their once over 1,000 store network, that lost their competitive positioning and experienced a death spiral of cost-cutting, store closures, restructuring and layoffs that was impossible to break.
Great commentary by the other panelists. I’d say there is a decent chance someone will buy Bed Bath & Beyond, maybe after a carve up as Paula mentioned. That company might look at Dick’s Sporting Goods or Best Buy as places to emulate, something I wish they had done when everyone was so excited that Tritton took over. The mass retailers don’t have the breadth that specialty retail has and Amazon lacks a physical store–some people still prefer to touch and feel certain categories. My gut tells me there is space in consumers’ minds for such a retailer but it would take a lot of work.
Target wins with a Buybuy Baby bankruptcy, there is still lots of money left on the table in this category in my opinion. For traditional bed/bath, it will likely spread among the players already mentioned by this panel.
This won’t end well for Bed Bath & Beyond. It’s hard to see the company emerging from Chapter 11 (if that’s even feasible) in anything but a weakened state. The store footprint has shrunk, the company never had a robust omnichannel strategy, and — most important — there are plenty of other places to buy what Bed Bath & Beyond sells. Depending on the category and brand name, the biggest market share gainers should be Target, Macy’s and Amazon.
Target, IKEA, and Walmart are the clear winners here. And of course Amazon.
But man, what if Bed Bath & Beyond had turned 50 percent of their namesake stores into Buybuy Baby locations and then closed the rest when they had the chance? Much less competition, a clearly defined niche, and I imagine it was likely a profitable business. Talk about a missed opportunity.
I don’t think there is much left for anyone to take. These stores have hardly done any sales the past six months.
It adds to commercial vacancy rates and isn’t great news but it has been clear for a couple years now this chain was headed to death.
The terrible Target copycat private label program was so poorly done.
Has retail learned its lesson yet on trying to reinvent using Target ideas?
Funny we lose this but so far JCP stays around. I’d have rather kept this than JCP.
“going to college”…Really ??
This is sad, I guess – I’m sure we all feel for (presumably soon to be ex-) employees – but such is the nature of a dynamic economy. They may or may not find a buyer, but even if they do I can’t see them being a major player ( notice I didn’t say “continue to be” as I don’t think they’ve been one for some time). Longer term beneficiaries are competitors, of which there are many – hence why they’re in bankruptcy … shorter term? I’ll give you a guess: it starts with “law” and ends with “yers”.
The unfortunate fate of Bed Bath & Beyond was hampered by its ill-timed embrace of private-label products. Too many private brands too quickly, before they had the infrastructure or consumer support. The nationwide rise of private label offerings is changing the marketplace dynamic in many categories, and for retailers to survive, they must be able to track these dynamics with an increasing level of frequency and granularity. With so much to consider in strategic pricing and the great reset that is happening with consumer expectations, the need to track the competition at the local level is more crucial than ever. In order for retailers to avoid the same fate, it’s critical they have access to real-time, hyper-local, actionable data.
I believe that Bed Bath & Beyond’s bankruptcy won’t have much impact on anyone since their offering can be found at other brands as well. However, due to its size and extensive retail presence, BBB is likely to find a new buyer.
However, BBB under a new leadership might become a scaled-down version of its former self, with a more focused merchandising strategy & customer base.
To remain competitive and regain growth, BBB will need to realign its entire system with its core values.