Bed Bath & Beyond About To Go Bankrupt?
Bed Bath & Beyond is facing some potentially dire financial circumstances and some agencies have upped their bankruptcy risk.
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Home goods chain Bed Bath & Beyond has been having a turbulent year. The retailer’s shares fell in early trading after Moody’s lowered its corporate-family rating to Ca from Caa2. The move comes amid concerns that the company could default on its debt in the next twelve months. The retailer’s continued struggles have been blamed on a mix of challenges, including products being stuck at ports and ongoing supply chain delays.
Former Target executive, Mark Tritton was tasked with leading Bed Bath & Beyond in 2019. But he left the company after an abysmal quarterly earnings report this summer. The Wall Street Journal detailed his failed efforts to boost the retailer’s private label offering. Analysts pointed to strategic flaws, and botched execution of turnaround plans as well as underlying weakness that preceded the CEO. He also did too much too fast during the supply chain crisis.
Now, Bed, Bath & Beyond has to deal with a leadership vacuum, as well as macroeconomic and operational challenges. As it tries to turn its financial situation around, the company has new debt financing as well as a plan to close over 150 stores and lay off staff to cut expenses. Additionally, bondholders have as little faith in the retailer as Moody’s rating agency and are trying to protect themselves from potential debt reorganization.
According to The Motley Fool, Bed, Bath & Beyond was reportedly investigating several potential scenarios like a distressed debt swap that would exchange the retailer’s outstanding bonds for new, longer-term debt or equity in the company. If it does take on new debt, existing debt holders are worried their claims on the retailer’s assets could be weakened. While its newly founded junk status isn’t extraordinary, the consensus is that the retailer is heading for bankruptcy.
Net sales for Bed’ Bath & Beyond plummeted 28% in the second quarter and comparable sales tumbled 26% from the year-ago period. What was once a reliable machine, generating $1 billion or more a year in free cash flow, has since deteriorated into one that just burns through money. As a result, financial analysts say the home goods chain should seriously consider endgame scenarios and Moody’s seems to agree.
Despite the retailer’s financial woes, Helen of Troy is encouraged by Bed Bath & Beyond’s efforts to turn sales around. Chief Executive Officer Julien Mininberg made the revelation during a second-quarter earnings call last week. The seller of brands like OXO, Vicks, and Hydro Flask had limited its business concentration with the home goods chain amid its money troubles, according to SupplChainDive. But the company will continue to supply the struggling retailer with its branded kitchenware.
Mininberg said the firm is working with Bed Bath & Beyond at the highest levels, and that he is encouraged by the chain’s plan to place renewed emphasis on supplier relations. “We are encouraged by their public statement emphasizing their refocus on leading power brands like OXO that have been so important to driving traffic and sales,” he said. The home goods chain recently struggled with supplier relations, with some vendors restricting or stopping shipments due to delayed payments.
