Bed Bath & Beyond’s Loss Exceeds Warning as Bankruptcy Looms

(Bloomberg) — Bed Bath & Beyond Inc. reported a wider net loss than expected on Tuesday, underscoring the likelihood of a bankruptcy filing within the next couple of months by one of the largest US home-goods retailers.

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The beleaguered retailer said its net loss widened to $393 million in the three months ended Nov. 26. Just last week, the company had said it expected to report a net loss of $386 million. That compares with a loss of $366 million in the second quarter.

The company reiterated on Tuesday that it was considering “all strategic alternatives” to get back on financial track. “Multiple paths are being explored and we are determining our next steps thoroughly,” Bed Bath & Beyond Chief Executive Officer Sue Gove said in a statement.

Last week, the retailer said those options included the possibility of bankruptcy, a warning that came after it withdrew a bond-swap offering. It had launched the plan in October to read its debt burden. The company said on Tuesday that it had about $200 million of cash on hand.

33% decline

Bed Bath & Beyond reported a 33% decline in net sales to $1.3 billion in the third quarter, in line with the preliminary results it published last week. The company said the plunge in sales was driven in part by its attempts to clear its private-label brands, part of a strategic pivot toward better-known national brands. Additional discounting also dinged revenue, the company said. The company had rolled out major promotions in a bid to drive traffic to its stores and website, but because of inventory problems, shoppers often couldn’t find what they needed.

Read more: Bed Bath & Beyond’s spiral quickened as suppliers lost patience

The retailer also said it’s on track to shutter the 150 lower-performing stores it had targeted for closing last year, part of a broader cost-cutting plan.

“Our organization is more streamlined and we have adopted a more focused infrastructure that reflects our current business,” Gove said in the statement. The company is targeting $80 million to $100 million in additional cost savings, which includes cuts to expenses and staff, she said. During a short results call Tuesday, she didn’t provide details on how many employees might be affected.

Those further cost-cutting efforts might not be enough.

The retailer, founded in 1971 in Union, New Jersey, is likely to seek bankruptcy protection within the first two months of this year, Bloomberg News has reported, citing people with knowledge of the plans. A ubiquitous brand in the US, Bed Bath & Beyond was once a staple of going-to-college shopping lists and wedding registries.

accelerating case

Bed Bath & Beyond’s decline has been years in the making and has accelerated in recent months as suppliers have become increasingly concerned about the retailer’s financial future and made demands to receive payments in advance. Other manufacturers have lowered their credit limits with the retailer in order to reduce the risk of not getting paid for their products.

That led to less merchandise on store shelves during the pivotal holiday season, which has exacerbated a vicious cycle of falling inventory levels, declining foot traffic and a decrease in revenue — which has made it harder, in turn, to pay suppliers.

Gove acknowledged those challenges during the call. “We experienced an acceleration in vendor payment terms and credit-line constraints,” she said. “This led to lower receipts” and pushed in-stock levels down to around 70%. The lack of inventory hampered sales, she added. In recent weeks, the company has been able to get those levels above 80% in some categories, Gove said, which has helped to drive more robust sales.

“This underscores our ability to achieve results when we have the supply,” Gove said on the call. The company didn’t take any questions from analysts, unlike its usual practice.

Bed Bath & Beyond shares rose 10% in volatile premarket New York trading Tuesday. The stock is down 88% in the past year.

(Updates with additional cost cuts in seventh paragraph, inventory woes in 12th and 13th paragraphs.)

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