In its latest move to try and secure product for its shelves, Bed Bath & Beyond unveiled a deal last week with ReStore Capital to create a vendor consignment program.
Few details about the deal were disclosed beyond the basics: Under the agreement, Re-Store — a financing arm of the liquidation specialist Hilco Global — would purchase up to $120 million in “pre-arranged merchandise” from the retailer’s “key suppliers” on a “revolving basis,” according to a release.
In a statement, CEO Sue Gove described the consignment deal, which would supplement existing inventory levels, as a “capital-light solution” that could “allow us to strengthen merchandise availability and better fulfill demand.”
The program follows a roller coaster for the troubled Bed Bath & Beyond, which has struggled to pay suppliers and on multiple occasions warned of a possible bankruptcy. In recent months, the retail chain has been able to secure capital by selling stock, though it said recently that it needs to raise more to stay afloat.
Bed Bath & Beyond disclosed in January that its in-stock position plummeted by 70% during the holiday season due to inventory constraints from suppliers tightening their payment terms.
Whether the ReStore deal will succeed in bringing in new inventory and sales remains to be seen. “It is way too late and beyond a desperate move,” Albert Furst, chief operating officer of credit analysis firm Creditntell, said in an email.
Consignment deals can come with lower operational and financial flexibility for retailers that use them, as retailers don’t own the inventory on their shelves and often accept revenue share or fee agreements with vendors.
For suppliers, consignment arrangements don’t necessarily erase risk. Consignment vendors fought Sears in bankruptcy court over its store closure plans once it fell into Chapter 11.
Moreover, Bed Bath & Beyond is still at risk of bankruptcy, which creates all sorts of risks for suppliers. Bed Bath & Beyond has dodged bankruptcy once already this year, and recently disclosed that its credit facility has shrunk to $300 million. Furst noted that the company only has $11.5 million under the facility to help finance its operations.
That’s not likely to inspire confidence in suppliers, some of whom are still leery of selling to Bed Bath & Beyond despite the retailer’s efforts to reassure them of its ability to pay for shipments.
“I spoke with a dozen or so vendors last week and the vast majority have not been paid since December or earlier,” Furst said, adding that many suppliers won’t even ship on cash-in-advance payment terms to the retailer.
Bed Bath & Beyond’s challenges to secure inventory and assuage suppliers has created opportunities for others. DataWeave analysis from January found that Bed Bath & Beyond’s inventory availability dropped precipitously beginning in July 2022 and worsened through the year, while levels among its peers remained stable.
Overstock.com has specifically targeted categories that Bed Bath & Beyond has historically specialized in as a growth area for the online retailer. Overstock CEO Jonathan Johnson told sister publication Supply Chain Dive in March, “We saw an opportunity to go to those suppliers that either weren't getting paid or canceling their contracts.”
Bed Bath & Beyond’s chief, however, projected some optimism in announcing the vendor deal, saying that the “support we are seeing from our top supplier partners demonstrates the staying power of our brands and our potential for sustainable improvement.”