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Has Bed Bath & Beyond Seen Its Last Holiday Selling Season?

With the bulk of fourth-quarter sales completed, Wall Street has started speculating on whether the struggling home goods retailer Bed Bath & Beyond Inc. (BBBY) has a reason to exist.

In an interview on Yahoo Finance Live on Thursday, Loop Capital analyst Anthony Chukumba said that retailers likely had a tough slog this holiday season, and cited Bed Bath & Beyond as one that might have seen its last yule.

“They’re simply just not relevant anymore. This really was [Lieutenant Colonel George A.] Custer’s last stand and it’s going to pretty much end the same way that it did for Custer,” Chukumba said, referencing the 1867 Battle of the Little Big Horn in which the Sioux Indians dealt U.S. troops led by Custer a solid defeat. He predicted that by the holiday 2023, “Bed Bath & Beyond will be gone.”

In contrast, Chukumba liked the long-term prospects of home retailer Restoration Hardware, even if it likely faces some near-term pain.

Home retailers have not been immune to the pull back on spending by consumers. Home retailers benefited from shoppers updating their home and home offices during the pandemic when they were told by local governments to shelter in place. But that pulled sales forward to 2020 and part of 2021. BBBY’s problem is that it has been struggling for years even before the Covid-19 pandemic. And the company is known for its high cash-burn rate, firing through more than $1 billion in the current year, including nearly $500 million in the first quarter alone. Cash burn rate is an important bellwether of corporate well-being, and is often used as an indication of where a company is headed.

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The pull back in home spending has placed the home furnishing retail group as the second category having a high probability of default at 4.9 percent, according to December data from S&P Global Market Intelligence. The group with the highest probably of default was Internet and direct marketing retail at 10.1 percent.

Meanwhile, BBBY is forging ahead on turnaround plans.

The retailer made another change to its executive leadership team, this time adding David Kastin as its executive vice president, chief legal officer and corporate secretary.

Kastin replaces Arlene Hong, who had been the retailer’s chief legal and compliance officer. According to Kastin’s LinkedIn profile, he joined the retailer in December.

BBBY in November added Bart Sichel as executive vice president and chief marketing and customer officer. Sichel, who had been Burlington Stores’ chief marketing officer, has a background in corporate restructuring from his 13 years at McKinsey & Co. Also last month, Scott Lindblom, chief technology officer, was elevated as he added chief digital officer to his list of responsibilities.

The change comes at a time when the struggling retailer is in the midst of a restructuring of its finances.

BBBY in September completed more than $500 million of new financing, including a newly expanded $1.13 billion asset-backed revolving credit facility (ABL) and a new $375 million “first-in-last-out” facility (FILO), led by J.P. Morgan for the ABL and Sixth Street Partners for the FILO.

“The enhanced liquidity is expected to be utilized to support immediate strategic priorities to drive traffic and sales and gain back customer relevance, including rebalancing the assortment and inventory position,” the retailer said.

Following the completion of the two facilities, BBBY’s former chief financial officer Gustavo Arnal committed suicide on Sept. 2. He was succeeded by interim CFO Laura Crossen.

BBBY needed the liquidity from the two facilities to buy goods for holiday and maintain operations for the selling season.

Second-quarter earnings results for the three months ended Aug. 27 showed a wider net loss to $366 million from a net loss of $73 million in the year-ago period. Net sales dropped 28 percent to $1.44 billion from $1.99 billion a year ago. First-quarter results for the period ended May 28 also reflected a wider net loss to $358 million from a net loss of $51 million in the same quarter ended May 29, 2021. Net sales fell 25 percent to $1.46 billion from $1.95 billion.

The first-quarter disaster also saw the exit in June of former CEO Mark Tritton. A lot of hope was pinned on Tritton, who joined the company in 2019, whom many thought could turn around the struggling retailer’s fortunes. He was succeeded by Sue Gove as interim CEO. Gove took over the CEO role in October.

The retailer has about $1.7 billion in long-term debt. In October, it commenced an exchange offer for certain Senior Notes, including those due in 2024, in an effort to effect a stronger financial position through a reduction of debt and interest expense.

The retailer was able to enter into privately negotiated exchanges with certain institutional holders totaling $123 million for new notes, which closed on Nov. 15. However, it still has a sizable amount that’s available for exchange following four extensions since the commencement of its October offer. The latest extension was on Dec. 20. Except for the group that completed the Nov. 15 exchange, there hasn’t been much additional interest from note holders. BBBY still has outstanding principal totaling $1.03 billion.

One of the concerns investors might have centers on whether BBBY can actually effect a turnaround. Wall Street isn’t exactly enthralled with the retailer’s prospects. And some vendors last month elected to stop or restrict shipments following a vendor summit where the retailer outlined its new strategy.