Home goods retailer Bed Bath & Beyond (BBBY) filed for Chapter 11 bankruptcy protection on Sunday, following years of declining sales. The company reported a 33% drop in sales and adjusted losses of $225 million in its most recent quarter. Sixth Street will provide BBBY with $240 million in debtor-in-possession financing to allow the company to continue operations during its wind-down process. CEO Sue Gove stated that the company’s Bed Bath & Beyond and buybuy BABY stores will remain open during the process. BBBY’s sales peaked at $12.3 billion in 2017 but dropped to just $7.9 billion in 2021, its lowest annual total since 2009.
Strategic Alternatives and Funding Deals
In January, BBBY began exploring “strategic alternatives” for its business. However, the company encountered setbacks when its initial funding partner pulled out less than two months later. The company later announced a funding deal with Hudson Bay Capital in February 2022. The deal aims to raise over $1 billion within a year. However, it should be with the condition that BBBY’s stock price remains above certain levels. However, the stock price dropped significantly from over $5 per share in February to under $1 in late March. This drop caused the termination of the funding deal with Hudson Bay. BBBY subsequently secured a new funding partner, B. Riley Securities, intending to restock shelves, pay back vendors, and revitalize sales at its remaining stores.
Stock Split and Meme Stock Craze
To address its liquidity concerns and comply with Nasdaq listing rules, BBBY announced a shareholder vote. The vote for a reverse stock split is scheduled for May 9. This decision came after BBBY’s stock price fell below $1 per share. The company indicated in an SEC filing that this move was necessary for survival. BBBY noted that a higher stock price was its last hope. By its bankruptcy filing, Bed Bath & Beyond’s stock had closed at $0.29. This represented a significant decline from its all-time high of roughly $80 per share in December 2013.
In March 2022, investor Ryan Cohen, responsible for sparking the market’s interest in GameStop towards the end of 2020, acquired a 9.8% stake in BBBY, causing a surge in the company’s shares. This surge was attributed to retail investor interest becoming part of Bed Bath & Beyond’s revival strategy. In an SEC filing on April 5, BBBY suggested that a reverse stock split could make its stock more appealing to investors. However, investor Ryan Cohen sold his entire stake in the company in mid-August 2022. Around the same time, BBBY shares closed as high as $23.
The decline in Sales and Retail Environment
Unlike its competitors such as Target, Macy’s, and Walmart, BBBY had fallen behind in the increasing trend of private labels, which had become a crucial part of the growth story for these retailers. The pandemic accelerated the company’s decline as shoppers turned to online retailers like Amazon and Wayfair. In recent years, BBBY stores, once the go-to spot for suburban families and college students, have been more associated with empty shelves and discounts.
BBBY’s sales have been declining significantly. Sales in 2021 were only $7.9 billion, the lowest since 2009. The company was on track for sales that matched mid-2000s levels in Q1-Q3 2022. BBBY lost more than a billion dollars in the same period. The cumulative loss between 2018 and 2021 was $1.4 billion.
The decline of Bed Bath & Beyond serves as a cautionary tale for traditional brick-and-mortar retailers. These retailers have struggled to adapt to the digital age. While online retailers like Amazon and Wayfair have thrived, Bed Bath & Beyond has been left behind. Its stores have become known for discounts and empty shelves rather than the wide selection of home goods they once offered.
Bed Bath & Beyond is beginning its wind-down process, and it is uncertain what will happen to its employees and suppliers. The company has not announced any plans for layoffs or store closures beyond what was already planned before the bankruptcy filing. However, the closure of stores and the reduction in operations will likely affect some employees and suppliers.
