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Bed Bath & Beyond Stuck in ‘Mushy Middle,’ Analyst Says

On the eve of its earnings call, Bed Bath & Beyond has many speculating on whether bankruptcy will be in its near future, and how the home goods retailer got to this point. And according to analysts from DataWeave and the Kearney Consumer Institute, inventory issues and changing consumer demand have contributed to the company’s decline.

Krish Thyagarajan, president and chief operating officer of retail data and pricing analytics firm DataWeave, said Bed Bath & Beyond’s average product availability was significantly lower than that of its closest competitors.

Looking at six key categories—bathroom, bedding, furniture and storage, home and decor, kitchen, and lighting—Bed Bath & Beyond’s average availability was only 53 percent, compared to next-lowest competitor Kohl’s at 61 percent, and the retailer’s own availability from June 2022, which was 77 percent.

“In the early part of 2022 all the way until about June, Bed Bath and Beyond’s inventory levels were high across six key categories—in fact, second only to Lowe’s,” Thyagaraian said. “But from there, and we can only speculate why, they started to go down and didn’t head back up until the holiday season.”

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Thagaraian said one bright spot for Bed Bath & Beyond was an uptick in availability in three categories heading into December—bedding, bathroom, and home decor.

“These three are critical categories, and if they can sustain the trend, perhaps calendar Q1 can be better. We’ll know more by the end of this quarter or next quarter if they’ve managed to turn the tide,” Thagaraian said. “It looks like they’re doing everything possible to turn their situation around and there’s a fair amount of goodwill out there toward Bed Bath & Beyond.”

Bed Bath & Beyond shifted its inventory focus in June, moving from reliance on private label brands to investing in national brands to fill out its assortment. But in November, several vendors said they were halting or delaying shipments due to overdue payments from Bed Bath & Beyond. At the time, Bed Bath & Beyond CEO Sue Gove said the retailer had caught up on those bills.

While inventory has certainly been a problem for Bed Bath & Beyond, Katie Thomas of the Kearney Consumer Institute said changing consumer attitudes have contributed to the retailer’s woes, as well.

“During the pandemic, we saw consumer habits change, with once-popular stores falling off the list of where to shop,” she said. “Some retailers were distracted by what made others successful, from fast shipping to private label, and lost their ‘reason for being’ to their own consumer. Others continue to get spun up in the idea that consumers want cheap prices, but under-account for the fact that they are often not interested in cheap quality.”

Thomas said mid-range retailers have struggled the most with this issue, unable to offer the quality and style of higher-end brands or the competitive prices of lower-end retailers.

“The ‘Death of the Middle’ has been building since the beginning of the pandemic due to consumers’ increased options, including on where and how to shop,” she said. “Luxury and discount, along with brands that have strong perceived value, are doing well, as many of them clearly stand for something in the eyes of the consumer. The mushy middle has struggled from lack of differentiation, not evolving fast enough to keep up with changing behaviors and needs.”

Thomas said online retailers, boosted by the pandemic, have taken a major chunk of market share from stores like Bed Bath & Beyond, which were too slow to react to the shifting nature of retail.

“With the advent of online and growth of big box retailers, the role of the physical store and its large merchandise selection changed,” she said. “We’ve seen chains from Best Buy to Barnes & Noble evaluate how to evolve their offering—from increased services to simplifying the product selection—to keep up with the consumer’s needs.”

That struggle showed up in Bed Bath & Beyond’s declining foot traffic. According to retail insights analytics firm, foot traffic was down significantly in the home goods retailer’s stores between 2021 and 2022. looked at foot traffic analytics for each month of both years, discovering visits were down 26.5 percent in December 2022 from the same month last year. And November traffic slumped 23.1 percent in 2022 from 2021.

With those two months accounting for Bed Bath & Beyond’s key holiday retail season, the declines take on a more ominous feel, pointing to larger revenue losses ahead and an demonstrating that the changes made by new leadership haven’t made a positive impact, thus far.

That said, S&P on Monday upgraded Bed Bath & Beyond’s issuer credit rating to CC from SD (selective default) and its issue-level rating on its outstanding unsecured notes to C from D. S&P said that while it made the decision to upgrade, it believes Bed Bath & Beyond is unlikely to reverse its negative cash-flow trends.

“We believe the likelihood of other strategic alternatives, such as asset sales, have significantly diminished,” S&P said via a press release. “In our view, the company’s rapid cash burn and ongoing inventory challenges reflect worsening vendor relationships that are unlikely to be resolved without an immediate and large injection of capital.”

S&P said it believes Bed Bath & Beyond is “likely to pursue a broad restructuring of its capital structure,” making a bankruptcy announcement during tomorrow’s earnings call a likely prospect.