Bed Bath & Beyond is on the brink of going bankrupt because of lower consumer traffic and reduced inventory levels.
Dancing With Bankruptcy
After 52 years in business, market experts predict that popular home retailer Bed Bath & Beyond is expected to file for bankruptcy by the end of January.
On Thursday, Bed Bath & Beyond said it expects net sales of approximately $1.259 billion, down 33% compared to $1.878 billion from the same time last year, reflecting lower customer traffic and reduced levels of inventory availability.
It’s stock, now trading in the $1 range, has lost nearly 90% of its value over the past 12 months.
The company is burning cash.
Net cash from operations was an outflow of $582.4 million in the quarter that ended August 27, compared to an inflow of $46 million in the prior year. The company ended the quarter with $135.3 million in cash, down from $440 million year over year.
“My best guess is that they will go into bankruptcy,” said Lauren Greenwood, president of kitchen storage and organization company YouCopia, which has sold merchandise to Bed Bath & Beyond in the past. She expects the retailer to close additional stores and emerge from a potential bankruptcy filing as a smaller company.
How Did It Get This Bad?
The company’s CEO and president, Sue Gove, blamed the poor performance on inventory constraints and reduced credit limits that resulted in shortages of merchandise on the shelves.
Analysts say supply chain issues with private label brands and issues paying suppliers have contributed to this lack of inventory. For example, in October, about 40% of the retailer’s inventory was out of stock.
In September, the company released a list of 56 stores that will close. At the time, the company was putting together a turnaround plan, which has since fallen flat based on the latest update.
People with knowledge of the matter told The Wall Street Journal the company is in the initial stages of planning for bankruptcy and that the process may extend into February.
Shares have fallen roughly 50% over the last week, increasing its losses to approximately 90% over one year.
The Go-Foward Plan
In the official press release Sue Gove, President & CEO of Bed Bath & Beyond said, “We have a clear vision for the future of the company. 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. Transforming an organization of our size and scale requires time, and we anticipate that each coming quarter will build on our progress.”
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.
The Union, New Jersey-based company went “woke” in 2020, which sent patrons into an uproar and caused many Americans to stop purchasing goods from the store.
The chain store publicly supported the well-known “hate group” Black Lives Matter and began selling its merchandise to support the group. In 2021, outspoken CEO of MyPillow Mike Lindell was upset that BB&B pulled his popular pillows from their stores after his show of support for Trump.
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