Bed Bath & Beyond receives Nasdaq warning over late 10-Q

Dive Brief:

  • Bed Bath & Beyond on Thursday said Nasdaq notifies the company that it “is not in compliance with the requirements for continued listing” on the world’s second-largest stock exchange for failing to file its 10-Q quarterly report with the SEC for the period ending Nov. 26, 2022.
  • Nasdaq requires companies that receive notice of deficiencies, delisting determinations or public reprimand letters to publicly disclose that they are out of compliance with the stock market’s listing requirements.
  • While this notice has no immediate effect on the listing or trading of the company’s common stock on the Nasdaq, it’s another blow with negative financial implications for the financially distressed retailer.

Dive Insight:

Bed Bath & Beyond said that “the company continues to work diligently to finalize its quarterly report and plans to file its quarterly report as promptly as possible to regain compliance with the listing rule.”

The company now has 60 calendar days from the notice date – in this case, March 13 – to submit a plan to regain compliance. If Nasdaq accepts the re-compliance plan, Bed Bath & Beyond may receive 180 calendar days from the report’s original due date to file its quarterly report. In this case, that date is July 23. The company’s stock was trading at about $3.40 on Nasdaq at the time of publication.

The non-compliance notice is another setback for Bed Bath & Beyond, which faces ongoing recent operational and financial challenges.

Bed Bath & Beyond’s familiar blue 20% off coupons for home decor merchandise have cemented a place in pop culture.

People wanted and needed to make their homes more functional and comfortable during the early days of the pandemic. But after that uptick, the company’s financial performance declined. As lockdowns ended, so did spending on home decor and essentials as many people returned to in-person work and school.

Part of that worsening sales performance was due to a failed strategy to introduce 10 private labels over a year and a half. But supply chain issues, which led to a high rate of out-of-stock products, resulted in millions in lost sales. The private label plan backfired.

At the start of the new year, ahead of its 2022 Q3 report, the retailer warned it could file for bankruptcy. Bed Bath & Beyond cited recurring losses, negative cash flow from operations and its current cash and liquidity projections in giving notice it may be unable to continue business as a going concern.

On Jan. 10, the retailer reported third-quarter net sales fell 33% year over year to $1.3 billion, while comparable sales declined 32%. Operating losses grew more than 423% from last year to $450.9 million. Net loss grew by 42.2% to reach about $393 million.

Bed Bath & Beyond’s probability of default market signal diverged from its industry peers starting in April 2022, according to S&P Global Market Intelligence. The probability of default market signal is “a market-implied view of a company’s credit risk.”

According to the report’s authors, “since [the] initial divergence, BBBY market signal [probability of default] persistently increased and peaked in July 2022 at a 1-year PD of 32%. In contrast with BBBY’s increasing PD, the home furnishing retail peer industry market signal PD remained constant.”

The report says the increased risk of default points to company-specific, rather than market or industry-specific issues.

The company this year initiated layoffs as a cost-cutting measure. In addition, last year it experienced operational challenges and saw several C suite changes and departures, including CEO Mark Tritton and Rafeh Masood, the chief customer and technology officer. Bed Bath & Beyond also faced a corporate rating downgrade from Moody’s; received a credit rating downgrade from S&P Global Ratings; closed more than 50 stores; and experienced a data breach.

On Tuesday, retailer Party City filed for Chapter 11 bankruptcy. Their decision “may signal the start of a trend,” Rick Hyman, a partner in Crowell & Moring’s financial services practice New York office, said in emailed comments shared with Retail Dive.

“Bed, Bath & Beyond, facing similar challenges, may quickly follow as retailers and consumer product companies are all addressing supply limitations, sourcing constraints, logistical nightmares and rapidly increasing costs,” Hyman said.

“With consumer confidence levels on the decline and household debt at an all-time high — while consumers watch wild swings lower in the stock markets — retail can anticipate continued pain in 2023. Unlike the difficult times faced in 2020, market participants cannot rely on government assistance to bail them out,” Hyman said.

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