With the specter of bankruptcy still hovering, Bed Bath & Beyond on Thursday said preliminary estimates project fourth-quarter comp sales have plunged as much as 50 percent versus a year ago.
The struggling home goods retailer expects Q4 net sales of $1.2 billion versus the $2.5 billion it reported for 2021’s fourth quarter. It estimates a 40 to 50 percent fall in comp sales and says it’s still operating at a loss and has “modest” free cash flow. The company plans to release final fourth-quarter results at the end of April.
Also on Thursday, Bed Bath & Beyond announced yet another stock offering aimed at raising funds to keep the troubled chain afloat.
This latest at-the-market offering could potentially raise $300 million for the retailer, which dodged a seemingly imminent bankruptcy filing in February with a Series A share offering. Hedge fund Hudson Bay Capital Management bought into that offering to the tune of $225 million, with the potential for another $800 million through the issuance of securities requiring the holder to purchase shares of Series A preferred stock in future installments. On March 8 the company announced its equity offering had netted another $135 million in gross proceeds.
Earlier this month, Bed Bath & Beyond added another potential $100 million to its turnaround effort with an amendment to its Series A stock offering, which would further facilitate up to $100 million of additional funding in April, for a cumulative total of $460 million to date. Under the amendment, Bed Bath & Beyond would adjust the price failure threshold to $1.00 until April 3. However, that potential influx of cash has been in jeopardy since the company’s stock has failed to reach the $1.00 threshold, and it dropped by as much as 11 percent Thursday following the new stock offering announcement.
In addition to the $300-million offering, Bed Bath & Beyond announced that it has entered into a common stock purchase agreement and registration rights agreement. Simultaneously, the company is terminating its previous public equity offering and all outstanding warrants for Series A Convertible preferred stock associated with that offering.
In a Securities & Exchange Commission filing, Bed Bath & Beyond said its $565 million revolving loan was reduced to $300 million with the caveat that the retailer will now be responsible for monthly interest payments.
The money Bed Bath & Beyond may raise from this offering will be used to pay debts as well as invest in store inventory, a sore subject industry analysts have repeatedly called out. The company has plans to close around 400 stores this year, and became the subject of a class-action lawsuit filed in New Jersey this week alleging it violated the WARN Act by failing to give required notice about layoffs.
“The actions we’ve taken have enabled us to create the necessary financial runway to begin restoring our iconic Bed Bath & Beyond and BuyBuy Baby businesses,” said Sue Gove, president and CEO, Bed Bath & Beyond. “We have raised $360 million of equity capital since the beginning of February, cured our default under our credit agreement, repaid material amounts of our ABL facility, completed our interest payment for our senior notes, all while jumpstarting our turnaround plans.”
But while Gove was optimistic in the company’s announcement, the prospectus filed with the SEC warned that bankruptcy is still a potential outcome should these sales not fully bolster the company, saying, “Our actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors. Such factors include, without limitation: our ability to use proceeds from this offering to pay down our outstanding obligations under our credit facilities and operate our business, risks related to the failure to receive the full amount of the gross proceeds from the offering of the shares contemplated hereby, which we expect will likely force us to file for bankruptcy protection.”
Along with these developments, Bed Bath & Beyond added a Walmart veteran to serve as brand president for its namesake brand. John Fleming, who joined the company’s board in 2019, succeeds Mara Sirhal, who is leaving the company. Fleming previously served as chief merchandising and marketing officer for Walmart, as well as global e-commerce CEO at Uniqlo.
Additional reporting by Jessica Binns.