Bed, Bath and Beyond is on the brink of bankruptcy

Struggling home goods giant Bed, Bath and Beyond is sinking into even deeper financial difficulty following a dismal holiday season, continued losses and credit issues with its vendors. Bankruptcy looms as a very real possibility as the company is self-reporting “substantial doubt” about its ability to “continue as a going concern.”

The news sent Bed, Bath and Beyond stock tumbling on Thursday with shares in the company down almost 30% just ahead of the close of regular trading.

Big losses and big credit issues

On Thursday the company reported preliminary sales figures for the third quarter of 2022, with net sales of $1.26 billion down drastically from $1.88 billion in sales over the same time period in 2021. The company anticipates $386 million in net losses for the quarter, over $100 million more than losses accrued over the third quarter of last year.

In May of this year, the company reported a total of 955 stores, including 769 Bed Bath and Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 135 buybuy BABY stores and 51 stores under the names Harmon, Harmon Face Values ​​or Face Values.

In August, the company announced it would shutter stores and lay off workers in a bid to turn around its beleaguered business, according to The Associated Press. It closed about 150 of its namesake stores and slashed its workforce by 20%. It estimated those cuts would save $250 million in the company’s current fiscal year. It also said in August that it had lined up more than $500 million of new financing.

Mired in a prolonged sales slump, the company also announced back in August that it would revert to its original strategy of focusing on national brands, instead of pushing its own store labels.

That reversed a strategy embraced by its former CEO Mark Tritton, who was ousted last June after less than three years at the helm, per AP. The company said it would get rid of one-third of its store brands less than a year after rolling them out.

Bed, Bath and Beyond’s current president and CEO, Sue Gove, noted the company has struggled to keep ample stock on hand thanks to credit issues with vendors, but even amid the host of grim financial news, she offered a glimmer of optimism about the company’s near term plans.

“We have a clear vision for the future of the company,” Grover said in a Thursday press release. “Today’s announcement underscores the importance of having initiated a turnaround at the start of the third quarter and why we strengthened our leadership team to execute each step with precision. Our plan has two anchors: the first enables us to refocus merchandising and inventory, operate more efficiently, and grow our digital and omni-capabilities, and the second focuses on strengthening our financial position.”

Gove’s turnaround efforts, however, may be a case of too little, too late according to some analysts.

Neil Saunders, managing director of GlobalData Retail wrote in a report Thursday that Bed Bath and Beyond is “too far gone to be saved in its present form.” He noted, according to The Associated Press, that the company could restructure under Chapter 11, but it would still need to come up with a credible plan to reinvent the business, and that is going to be challenging, particularly in a weakening economic environment.

“A catalog of missteps has run the company into the ground and has made it increasingly irrelevant,” Saunders wrote. “Only very radical action will allow it to survive and even if it does, it will be a shadow of its former self.”

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