- Bed Bath & Beyond on Thursday issued a “going concern” warning based on recurring losses, negative cash flow from operations, and its current cash and liquidity projections.
- The retailer continues to eye strategic alternatives, including restructuring or refinancing its debt, seeking additional debt or equity capital, pulling back on or delaying other business activities, selling assets or filing for bankruptcy, though it acknowledged that those efforts may not be successful, according to a filing with the Securities and Exchange Commission.
- The warning came ahead of the company’s third quarter earnings report. Bed Bath & Beyond on Thursday released preliminary results for the quarter ended Nov. 26, expecting net sales to fall nearly 33% to $1.3 billion, SG&A expense to decline 16.4% to $583.6 million and net loss to widen by nearly 40% to $385.8 million.
As sales continue to slide and losses grow wider, Bed Bath & Beyond said it has “substantial doubt” it can continue to operate as a going concern.
CEO Sue Gove said that despite more productive merchandise plans, the struggling retailer’s financial performance was negatively impacted by inventory constraints and reduced credit limits, which resulted in lower levels of in-stock items.
"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,” Gove said in a statement.
The retailer has faced declining sales and shares for some time. Gove, who was named interim CEO in June and took on the role permanently in October, in August laid out a plan that included laying off employees, closing hundreds of stores and cutting back on private labels in favor of national brands.
But Bed Bath & Beyond’s announcement Thursday underscores that “the turnaround plan put in place last year is not working,” according to GlobalData Managing Director Neil Saunders. “Despite a desperate attempt to shore up finances and improve the customer experience, sales continue to sump and losses continue to mount. Put bluntly, the business is moving at rapid speed in the wrong direction with bankruptcy the most likely destination.”
“In our view, Bed Bath & Beyond is too far gone to be saved in its present form. A catalogue of missteps has run the company into the ground and has made it increasingly irrelevant. Only very radical action will allow it to survive and even if it does, it will be a shadow of its former self.”
Bed Bath & Beyond on Thursday also said it needs more time to file its quarterly report with the SEC and announced it has terminated its bond exchange offer, initially announced in October, “as a result of the conditions applicable thereto not being satisfied.”