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Will Bankruptcy Drama Dismantle Bed Bath & Beyond?

With a potential bankruptcy looming, Bed Bath & Beyond has been in talks with lenders that could possibly finance the company during its bankruptcy process, as well as private equity firm Sycamore Partners, which may be interested in purchasing assets.

According to a report in The New York Times, Sycamore Partners spoke with Bed Bath & Beyond representatives about potentially buying the company’s BuyBuyBaby brand, which has performed slightly better than its parent company. The retailer is also in talks with other possible buyers, sources close to the matter told the Times.

Sycamore Partners has a number of retailers among its investments, including Staples, Talbots, Lane Bryant, and Belk.

Bed Bath & Beyond announced dismal third-quarter sales for fiscal year 2022, with a 33 percent net decline and a comparable sales drop of 32 percent. BuyBuyBaby fared a bit better, with losses in the low-twenties percent range.

Bed Bath & Beyond also has been meeting with potential lenders who could help fund the company’s bankruptcy, according to a Bloomberg report. People with knowledge of the matter told Bloomberg that the talks include the possibility of a so-called stalking horse bid, in which the party would also offer to buy some or all of the company’s assets in bankruptcy and set the low-end of the bidding bar so that others can’t offer less.

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Last week, the retailer brought on turnaround consultants AlixPartners as its restructuring advisor, replacing Berkeley Research Group LLC. Bed Bath & Beyond also has been working with investment banker Lazard Ltd. and law firm Kirkland & Ellis LLP as it weighs its options, potentially preparing for bankruptcy.

During its earnings call last week, CEO Sue Gove said the company would enact $80-$100 million in cost reductions across its corporate structure, including layoffs and expense reductions.

“We continue to work with advisors as we consider all strategic alternatives to accomplish our near- and long-term goals,” Gove said during the retailer’s earnings call last week.