The struggling home goods retailer said it has a commitment for $240 million in debtor-in-possession loans to finance its operations. The company has $1.8 billion in long-term debt, per court documents.
However, though it is still looking for a buyer, the DIP financing will most likely facilitate an orderly wind-down of its namesake and BuyBuy Baby businesses. The company has worked to sell itself since last year, to no avail, Chief Financial Officer and Chief Restructuring Officer Holly Etlin said in a filing.
Founded in 1971, Bed Bath & Beyond is one of the original “category killers” — retailers that took advantage of department stores’ declining appeal to establish specialty stores offering discount prices. The home goods company went public in 1992 and its revenues surpassed $1 billion by 1999, per its court filing.
But a series of operational and financial maneuvers — many of the latter coming in swift succession in just the last few months — undermined that momentum. Stores lost traffic and sales after the retailer pulled back on its ubiquitous and highly popular coupons, Etlin noted. Bed Bath & Beyond was also late to embrace e-commerce, she said.
On top of its self-inflicted troubles, the retailer like many has continued to face pandemic-related challenges, including supply chain disruptions and a decline in the demand in home goods that surged while consumers were stuck at home, according to Etlin. Bed Bath & Beyond’s weak online operation prevented it from competing while stores were closed in 2020, according to Euromonitor analyst Bob Hoyler, who noted in emailed comments that its sales also dropped 27% in 2021 while rivals bounced back.
A switch in strategy to focus on private brands also backfired, as customers encountered these unknown labels instead of the name brands they were looking for, Etlin said. The effort was led by CEO Mark Tritton, who arrived in late 2019 and had overseen the store-brand powerhouse at Target for years; he left last year. And it wreaked further havoc on its supply chain, Hoyler said.
“While many US retailers had to deal with similar supply chain shortages over the course of the 2021, Bed Bath & Beyond’s ill-timed shift in strategy compounded the retailer’s woes to a remarkable degree,” he said.
It may have seemed like a sensible tack, given that Target and its brands had siphoned share from Bed Bath & Beyond for years. But it looks like that was the beginning of the end, according to GlobalData Managing Director Neil Saunders.
“If there is a single point of failure of Bed Bath and Beyond, it’s that the company stopped being relevant to consumers,” he said in emailed comments. “Arguably, this goes back a long way thanks to the rise of online and the improvement of home offers at rivals like Target. Against this increased competition, Bed Bath and Beyond’s approach to retail – which lacked inspiration – was found wanting.”
The company runs 360 stores in the United States. Earlier this year it began winding down its Canadian business, including 65 stores, and all 50 of its Harmon beauty stores. That’s down from 949 stores as of late last year – 762 Bed Bath & Beyond stores in all 50 states, Washington, D.C., Puerto Rico and Canada; 137 BuyBuy Baby stores, and 50 stores under the Harmon, Harmon Face Values or Face Value banners. The retailer has now embarked on a liquidation process, although it remains hopeful that a buyer will come forward, according to Etlin.
“Bed Bath & Beyond has pulled off long shot transactions several times in the last six months, so nobody should think Bed Bath & Beyond will not be able to do so again,” she said. “To the contrary, Bed Bath & Beyond and its professionals will make every effort to salvage all or a portion of operations for the benefit of all stakeholders.”
Of the company’s two remaining businesses, its BuyBuy Baby banner is most likely to attract a buyer, Saunders said. Its namesake “should be liquidated as it is too deeply in the red and is in no fit state to salvage,” he said.
“It could emerge as an online-only operator but, in our view, this would mean reduced visibility and a much more difficult trading model from a profit perspective,” he also said. “Ultimately, if it emerges from bankruptcy at all, Bed Bath & Beyond will be a shadow of its former self.”