Stocks & Forex
How Bed Bath & Beyond went bankrupt
After months of trying to avoid bankruptcy, Bed Bath & Beyond filed for Chapter 11 proceedings yesterday (April 23).
3 considerations before your company takes a stance
Founded in 1971, Bed Bath & Beyond was one of the original big-box retailers, selling everything from sheets and rugs to kitchen appliances, and peaking before the likes of Amazon appeared on the scene. Over the last decade, though, Bed Bath & Beyond has struggled to cope with its haphazard inventory and a misaligned online sales presence. The pandemic only made things worse, given that its online strategy couldn’t match up to those of its rivals.
The company has been warning of bankruptcy is an eventuality since the start of the year, citing lower customer traffic and reduced levels of inventory availability, among other business struggles.
Cash-strapped and debt-laden, Bed Bath & Beyond made a number of last-ditch efforts to save the company from going under: store closures, layoffs, finding a private investor, raising money in the public markets, and even getting another vendor to foot the bill for its merchandise—but nothing quite worked out. Now Bed Bath & Beyond has joined a growing post-pandemic list of ailing retailers, such as Party City and David’s Bridal, that have filed for bankruptcy so far this year.
Company of interest: Buy Buy Baby
Bed Bath & Beyond has filed motions with the New Jersey bankruptcy court to auction two of its brands: the namesake Bed Bath & Beyond, and buybuy Baby, the baby merchandise chain store it acquired in 2007 for $67 million. In a March 2022 letter, Ryan Cohen, the chairman of GameStop and a former activist investor in Bed Bath & Beyond, suggested that buybuy Baby was worth more than its parent company’s entire market capitalization, and that it should be spun off or sold.
Harman Face Values, a discount health and beauty retailer that has been a subsidiary of Bed Bath & Beyond since 2002, will not be put up for auction.
By the digits: Bed Bath & Beyond’s burdens
40-50%: The drop in sales during the fourth quarter of 2022, compared to the previous year, according to preliminary earnings.
100: The number of cartons inventory that one Bed Bath & Beyond store in the Midwest received two or three times a week during 2022’s holiday season—a dramatic drop from the 400 cartons that it received five times a week during the 2021 holiday season
360 and 120: The number of Bed Bath & Beyond stores and buybuy Baby stores respectively that are open for the moment but will be shuttered over time. At its peak in the 2010s, Bed Bath & Beyond was the largest home furnishings retailer in the US, with more than 970 stores.
$48.5 million: How much Bed Bath & Beyond had raised as of April 10, by selling around 100.1 million shares, far short of the $300 million hoped to earn through the share sale.
$240 million: How much Sixth Street has agreed to lend Bed Bath & Beyond in debtor-in-possession financing to see the bankruptcy process through. Bed Bath & Beyond said it will continue to pay employee wages and benefits, maintain customer programs, and honor obligations to critical vendors.
$4.4 billion versus $5.2 billion: Bed Bath & Beyond’s assets and debt respectively, as of November.
25,001-50,000: The range of the total number of creditors to whom
Bed Bath & Beyond owes its $5.2 billion debt.
14,000: The number of workers employed at Bed Bath & Beyond, whose jobs will eventually vanish, likely without any promising severance packages.
Quotable: Bed Bath & Beyond’s folding
“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. 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.” —Sue Gove, President & CEO of Bed Bath & Beyond
A brief timeline of Bed Bath & Beyond’s unraveling
2019: Struggling to get quarterly revenue growth in the black, the company brings in Mark Tritton, Target’s former chief of merchandising, as CEO.
2020: The covid-19 pandemic brings in-store retail to a standstill. Bed Bath & Beyond’s online sales boom, but it still lags behind rivals like Target.
2021: In a post-covid world, Bed Bath & Beyond shifts focus to private brands, but these don’t resonate with customers. Still, the stock soars courtesy the meme-stock craze.
March 2022: GameStop chairman Ryan Cohen reveals he owns a stake of nearly 10% in Bed Bath & Beyond.
June 2022: Tritton is fired after sales slump 25% in the first quarter. Sue Gove, the new CEO, takes over.
August 2022: The meme stock mania temporarily returns, until Cohen reveals his intent to sell his entire position, which sinks the stock. The company axes a third of its private labels. A shareholder sues the company, accusing the CFO Gustavo Arnal of conspiring with Cohen in a pump-and-dump scheme. Arnal dies by suicide a few weeks later.
January 2023: Bed Bath & Beyond ends 2022 with over $1 billion in debt and, in a Jan. 5 regulatory filing, expresses “substantial doubt” about the business’s “ability to continue going.” In another securities filing on Jan. 25, the retailer says it defaulted on its loans and is considering alternatives for repayment—including restructuring its debt in bankruptcy court.
February 2023: The company narrowly avoids bankruptcy by raising around $225 million in an equity offering. Hudson Bay Capital Management is the lead investor in the share sale. The infusion comes with the possibility of another $800 million being pumped in over the next 10 months.
March 2023: The deal with Hudson Bay Capital is terminated after a sharp drop in sales again. Turning to the public market, Bed Bath & Beyond offers $300 million of its stock to generate funds and warns that it expects to “likely file for bankruptcy” if it doesn’t raise enough money.
April 2023: Bed Bath & Beyond signs a deal with the liquidator Hilco Global. A Hilco subsidiary named ReStore Capital agrees to buy up to $120 million in merchandise from the company’s key suppliers after relationships with Bed Bath & Beyond’s vendors soured over its liquidity issues. Two weeks later, the company files for bankruptcy on April 23. Store-closing sales are scheduled to start on April 26. The deadlines for returns, exchanges, using merchandise credits and gift cards, and more, are spread out over next month—all of which is laid out on the company’s Chapter 11 FAQ page.
One more thing: Bed Bath & Beyond is still looking for a buyer
Bed Bath & Beyond is “strategically managing inventory to preserve value” as it remains hopeful about finding a buyer, a statement said. “In the event of a successful sale, the Company will pivot away from any store closings needed to implement a transaction,” it added. In the absence of a last-minute buyer, the company will be fully liquidated.
🏦 Bed, Bath & Beyond is making a $300 million effort to skirt bankruptcy
🛏️ Bed Bath & Beyond tried decluttering and shoppers rebelled
🛀 Bed Bath & Beyond missed earnings expectations a week after the company warned of potential bankruptcy