Bed Bath & Beyond recently released a statement warning that bankruptcy is on the table if its financial situation doesn’t improve. The company’s sales have dropped by more than 30% over the past year due to low customer traffic and inventory levels.
“The Company continues to consider all strategic alternatives, including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the Company’s business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code,” the statement read.
The news wasn’t well received on Wall Street, and the company’s share fell nearly 30% by the end of the day, hitting its lowest levels since 1993.
Bed Bath & Beyond Struggles to Mount a Comeback
Bed Bath & Beyond, which is known for selling home goods, has struggled with low sales and lagging foot traffic in its stores for a while. In August, the company outlined a turnaround strategy, which involved cutting costs and improving partnerships with other vendors.
Bed Bath & Beyond also closed 150 stores and eliminated 20% of its workforce. This helped the company lower its expenses, but sales are still down significantly from where they were a year earlier.
The company’s lagging sales are partly due to a shift in consumer spending. Increasingly, consumers are less interested in spending money on houseware, especially as the housing market begins to lag.
Many consumers are still concerned about inflation and a looming recession as well. Bigger brands are often hesitant to partner with Bed Bath & Beyond due to its mounting debt, so the company hasn’t seen much traction from partnering with other brands.
What’s Next For Bed Bath & Beyond?
It seems plausible that bankruptcy could be on the horizon for Bed Bath & Beyond, as the company has been losing market share for a long time. Filing for bankruptcy would allow the company to restructure its debt and cancel leases on underperforming stores. While it’s likely not their preferred move, it could give them an opportunity to improve their structure and turn the ship toward clearer waters.
During the third quarter, the company’s sales were $1.259 billion, down from $1.878 billion a year earlier. The company has just $0.5 billion in liquidity and is running out of time to generate positive cash flow. Wedbush analyst Scott Batham says he anticipates that the company will run out of liquidity in 2023, making bankruptcy much more likely.
Other retailers, like JCPenney, Walmart, and Kohl’s, could take a hit if Bed Bath & Beyond files for bankruptcy. However, any negative impact is likely to be temporary.
The company announced it would close an additional 130 stores across the country, affecting landlords and the foot traffic to surrounding businesses. As of November 2022, the company still has 762 Bed Bath & Beyond stores located across all 50 states.