Bed Bath & Beyond Files Bankruptcy

Bed Bath & Beyond once offered consumers an alluring bargain shopping experience; however, over time it has lost market share to big box stores like Target and Walmart, as well as falling behind the e-commerce curve.

Homegoods retailer HomeSense has avoided bankruptcy for now by successfully completing a complex stock offering that will give it immediate funding of $225 million plus pledged support of $800 million over time to reduce current debt load and shrink store footprint.

1. It’s a sign of the times

Bed Bath & Beyond has long been a mainstay in American shopping landscape, but its dismal performance could threaten its future. In a public filing Thursday, Bed Bath & Beyond expressed "substantial doubt" as to its ability to continue operating independently and suggested bankruptcy protection may be sought as soon as this month.

Kirkland & Ellis LLP restructuring lawyers and investment bankers at Lazard Ltd (LAZ.N) have been brought on board to explore all avenues to regain market share and enhance liquidity, according to a statement issued by the company. AlixPartners LLP also provided consulting assistance as many other distressed retailers, such as cryptocurrency lender BlockFi, needed help recovering.

Bed Bath & Beyond's sales have taken a significant plunge over recent years, falling further behind competitors like Amazon.com and Walmart as it reduced coupons and stock from national brands to focus on more private label offerings. It also fell behind on payments to vendors, leading to supply chain problems as more suppliers hesitated sending merchandise for them.

As a result, their inventory remained low and stores struggled to attract customers. When former Target executive Mark Tritton took control in 2019, he implemented his controversial strategy of replacing big-name brands with cheaper private label alternatives which alienated customers who were loyal to those companies.

With no optimism from creditors and declining sales, this new strategy prompted an unpredictable series of decisions which led to potential bankruptcy filing for the retailer. Plans were announced to close 150 more stores, lay off 20% of corporate staff and discontinue some in-house brands altogether.

Analysts and brokers believe it's likely that Home Goods would shed additional stores if it seeks bankruptcy protection, creating additional vacant retail real estate on the market and leading liquidators to quickly launch store closing sales that could begin this weekend, according to sources familiar with this matter.

2. It’s a warning to other retailers

Bed Bath & Beyond may be in danger of bankruptcy after defaulting on its $1.5 billion bond payment, according to sources familiar with the matter. A Securities and Exchange Commission filing from Bed Bath & Beyond indicates its failure to make this bill payment will prompt restructuring its debt in bankruptcy court proceedings.

The company plans to close approximately 87 stores, reduce corporate workforce by 20% and close several in-house brands as part of an effort to cut expenses.

But they are only the first step on a long, difficult road to recovery for Bed Bath & Beyond. Repairing relationships with customers and suppliers could take some time; finding new lenders who will lend the company additional capital could take even longer.

Walmart and Target, two other retail giants already struggling from the recession, could feel even greater strain from Bed Bath & Beyond's decline should holiday sales prove disappointing.

Retail real estate brokers are bracing themselves for an anticipated surge in store closures by Union, NJ-based retailer Pier 1 Imports. Pier 1 has long been a mainstay in shopping centers nationwide and their leases could potentially bring landlords millions in rent in an economic downturn.

Retail brokerage firms believe many of its stores are strategically placed, featuring plentiful parking, strong demographics and co-tenancy arrangements - qualities which could present landlords with issues if the company attempts to liquidate assets and leases, analysts warn.

If the company files for bankruptcy, auctioning its leases could help restructure debts - although this alone might not be sufficient to save it according to experts.

Analysts note that another option could be to try selling off stores or restructuring loans with vendors, though this can be challenging as buyers may not wish to deal with a bankrupt business.

Bed Bath & Beyond's troubles won't simply go away once it files for bankruptcy. Brand recognition remains crucial among consumers and potential buyers, and so Bed Bath & Beyond needs to leverage that in order to improve operations while becoming more cost-efficient online according to suppliers.

3. It’s a sign of the future

Bed Bath & Beyond (BBBY) announced Thursday it is exploring strategic alternatives, including restructuring debt, seeking additional cash and filing for bankruptcy. The retailer owes creditors over $1.1 billion, and appointed a restructuring expert to its board.

Recent efforts by the company to turn it around have fallen flat and it failed to address a sales slump that hit retailers hard, while also struggling against online discounters.

A nationally recognized store has come under pressure to both reduce costs and increase traffic, and to do so it has closed 150 of its namesakes stores while cutting about 20% of its workforce, in addition to securing over $500 million in new financing.

Some suppliers believe Bed Bath & Beyond is struggling to pay its bills, prompting some suppliers to suspend shipments over unpaid invoices. Others spoke anonymously with The Wall Street Journal about being owed money from them but were waiting on payment.

One of the first signs that the chain was struggling came in March when it revealed a $3.2 billion debt load, though they tried to offset some of it through stock repurchases but this wasn't enough to avoid financial distress.

This business attempted to restore itself by cutting coupons and inventory from national chains while emphasizing its private-label brand, alienating customers who were loyal to larger chains and leading to an unexpected drop in sales. This move alienated those customers, leading them to disengage from them altogether and further decreasing revenue.

As a result, the company was unable to pay its vendors on time, leaving its stores bare. This led to cash loss and eventually led to new management being brought in.

Mark Tritton, former Target executive, took over and initiated a plan to shift more inventory toward private-label products - an endeavor supported by investors but which ultimately resulted in sales decline. Unfortunately, investors did not find his strategy effective and support vanished with sales declining drastically as a result.

Sue Gove, the current CEO, took over in 2022 and implemented a drastic restructuring plan: closing 150 of their namesakes stores and cutting the workforce by 20% while raising $500 million in new financing to stave off bankruptcy; otherwise the chain may be liquidated.

4. It’s a sign of the past

Bed Bath & Beyond (BBBY), one of the home goods retail giants, filed for bankruptcy protection Thursday amid declining sales and foot traffic. This development came following months of stagnant sales growth and decreased foot traffic.

Home goods chain Sears Holdings Inc is having difficulty meeting its debt payments to suppliers and keeping stores open while at the same time losing customers to rival chains. Owing approximately $3 billion, Sears is working with various financial advisors on potential solutions, including public offering. According to reports, Sears owes about $3 billion of debt and has engaged several advisors for advice in seeking solutions such as possible public offerings of equity.

Analysts are alarmed about inventory shortages at a store caused by late payments to vendors. To repair its damaged relationship with suppliers, management has attempted to change course by decreasing private-label offerings while increasing national brand inventory.

However, that strategy has failed miserably - alienating loyal shoppers who had become used to shopping at the store while damaging relationships with vendors who are no longer as willing to provide payment quickly for products sold through retail channels.

Bed Bath & Beyond has begun the process of consolidating its real estate footprint and cutting costs to become more profitable, according to Bloomberg. They own Buybuy Baby which could potentially be sold off to raise additional capital.

Even with its well-known brand, the company has had difficulty competing against online retailers. Their clumsy website and lack of pickup options have hurt sales significantly.

Many shoppers have begun switching over to other retailers like Walmart (WMT) and Target (TGT) that provide more convenient experiences at lower prices - this may be good news for customers but could signal bad news for the company itself.

Home goods retailer Home Goods Inc has experienced an uncertain few years, undergoing high-profile executive changes and numerous restructuring efforts. Recently it hired advisors with bankruptcy experience, possibly signalling its intention to file for protection sooner rather than later.