Bed Bath & Beyond warns it may go out of business
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Bed Bath & Beyond warned that it expects to report third-quarter revenue of US$1.26 billion (S$1.69 billion) – a steep decline from the US$1.89 billion it reported a year ago.
PHOTO: AFP
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New York – Bed Bath & Beyond has begun preparations for a bankruptcy filing that would likely come during its first operating quarter of the year, according to people with knowledge of the moves.
The company on Thursday called off a proposed debt exchange and said that it might not be able to continue as a going concern.
It added in a filing that it is taking steps to improve its cash position, but that recurring losses and negative cash flow for the nine months ended Nov 26 leave “substantial doubt” that it can stay in business. The company said it is pursuing options including restructuring debt, selling assets or filing for bankruptcy, but added that “these measures may not be successful”.
Some suppliers had begun to halt shipments to the retailer in recent months, citing concerns about the company’s outlook. This aggravated its already tenuous financial situation, accelerating a downward spiral that has been nearly a decade in the making.
Bed Bath & Beyond, which for decades has been a mainstay of malls and shopping centres around the United States, was plagued by years of management missteps and a dysfunctional corporate culture that left it ill-equipped to compete against Amazon.com and other online retail juggernauts.
Following the announcements, Bed Bath & Beyond’s bonds fell to new lows. Its 2024 notes traded down to around 12 cents on the dollar from around 22 cents on Wednesday. The company’s shares fell 30 per cent to US$1.69 on Thursday.
Bed Bath & Beyond warned on Thursday that it expects to report third-quarter revenue of US$1.26 billion (S$1.7 billion) – below the US$1.4 billion analysts had estimated and a steep decline from the US$1.89 billion the company reported a year ago.
Losses are also mounting, with the company expecting a net loss of about US$386 million for the three months ended Nov 26 – about 40 per cent larger than the loss reported a year earlier.
The drop in third-quarter sales and the widening losses indicate that the holiday shopping season was worse for the company than its executives had anticipated.
“My best guess is that it will go into bankruptcy,” said Ms Lauren Greenwood, president of kitchen storage and organisation company YouCopia, which has sold merchandise to Bed Bath & Beyond in the past. She expects the retailer to close additional stores and emerge from a potential bankruptcy filing as a smaller company.
At the end of August, the company already said it was closing about 150 poorly performing stores and cutting 20 per cent of jobs across its corporate and supply chain operations.
Other suppliers said that Bed Bath & Beyond is more likely to try to restructure its debts rather than liquidate because the company is well known across the US – an advantage that gives it an edge over other struggling retailers. The company needs to harness that name recognition to improve its e-commerce operations, which are lacklustre compared with those of its competitors, and encourage shoppers to buy online and pick up in store, for example, to boost foot traffic, some suppliers said.
“Many students made their first major purchase at Bed Bath when they were going to college and many individuals signed up for the wedding registry when they were getting married,” said Mr Steve Greenspon, chairman of the International Housewares Association trade group, adding that he believes the company has “an ongoing position in retail”. BLOOMBERG
