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Bed Bath & Bankruptcy? Retail Giant Running Out of Options

The problems are piling up for Bed Bath & Beyond.

On the eve of its fiscal 2022 third-quarter earnings report, the beleaguered home goods retailer said it could file for bankruptcy as one of the strategic alternatives it’s looking at, including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying business activities and strategic initiatives, selling assets, or other strategic transactions or measures. 

That’s according to a filing with the United States Securities Exchange Commission (SEC), which requested additional time for Bed Bath & Beyond to complete its quarter-end close procedures for the third quarter, which ended on Nov. 26, 2022.

“While the company continues to pursue actions and steps to improve its cash position and mitigate any potential liquidity shortfall, based on recurring losses and negative cash flow from operations for the nine months ended November 26, 2022, as well as current cash and liquidity projections, the company has concluded that there is substantial doubt about the company’s ability to continue as a going concern,” Bed Bath & Beyond stated in the filing.

Bed Bath & Beyond announced via a press release Thursday that it anticipates net sales of approximately $1.259 billion for the third quarter of fiscal 2022 compared to $1.878 billion during the same period a year ago. The retailer blamed lower customer traffic and reduced levels of inventory availability, among other factors. Some vendors last year said they stopped shipping to the retailer because it had problems paying invoices.

Bed Bath & Beyond anticipates a net loss of approximately $385.8 million for the third quarter, including impairment charges of approximately $100.0 million, compared to a net loss of $276.4 million in the year ago period. SG&A Expense is expected to be approximately $583.6 million compared to approximately $698.0 million in the year ago period, driven by the execution of cost optimization initiatives to right-size the company’s expense structure. 

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The company is set to report its full third-quarter results on Jan. 10.

“Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macro- economic challenges,” said Sue Gove, president and CEO of Bed Bath & Beyond. “Reduced credit limits resulted in lower levels of in-stock presentation within the assortments that our customers expect. Consequently, we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors. We have seen trends improve when in-stock levels have increased.”

Market research firm Telsey Advisory Group released an outlook for Bed Bath & Beyond today, noting, “we do not expect much improvement in the sales trend in 3Q22 vs. the (26 percent) reported in 2Q22 and noted soft traffic and high markdowns during our Black Friday and holiday checks.”

Earlier this week, an SEC filing from September 2022 questioning whether Bed Bath & Beyond had implemented any risk mitigation strategies to remedy supply chain issues became public, causing the retailer’s stock to plummet.

Gove, who took over as CEO late last year following an interim period after the ouster of former CEO Mark Tritton, has attempted to lead the struggling retailer back onto the right track with store closures, layoffs and a refocus on national brands from Bed Bath & Beyond’s recent reliance on private labels. The company also secured $500 million in financing for incremental liquidity, including an expanded asset-based loan facility of $1.13 billion and $375 million in the form of a first-in, last-out loan, in September, the same month that saw finance chief Gustavo Arnal plunge to his death from a Manhattan tower.

“We are resetting foundational elements to create a stronger and more nimble infrastructure that aligns closely with customer demand and preference,” Gove said. “We continue to manage our financial position amidst a changing landscape and work with expert advisors as we consider all paths and strategic alternatives to accomplish our short- and long-term goals.  We look forward to providing an update on these fronts on our formal third quarter earnings call next week.”