Bed Bath & Beyond is fighting to keep another B word away from its name – bankruptcy. On August 31, the company announced some changes to drive profitability as the brand struggles to improve its balance sheet.
The home goods provider revealed that it has plans to cut down its workforce by 20%, close nearly 150 stores, and pull the shutters on some of its in-house brands.
In Bed with Bankruptcy
Sue Gove, Director & Interim Chief Executive Officer commented, “We are embracing a straight-forward, back-to-basics philosophy that focuses on better serving our customers, driving growth, and delivering business returns. In a short period of time, we have made significant changes and instituted enablers across our entire enterprise to regain our dominance as a preferred shopping destination for our customers’ favorite brands and exciting products. We command a special presence in the Home and Baby markets, and we intend to fulfill our opportunity to be the category retailer of choice.”
The company plans to turn around its fortunes by trimming its selling, general, and administrative expenses (SG&A) to $250 million in the 2022 fiscal year. The announcement was met with skepticism by Wall Street and its stocks plunged nearly 21%. At the start of August, Bed Bath & Beyond’s shares had fallen to $4.89 per share before clawing its way up to $30 mid-August. Investor Ryan Cohen sold off his take in the home goods company, triggering a wave of panic in risk-averse Wall Street. But the stock bounced after it was rumored that the company is receiving a fresh round of financing.
The company also revealed that it will reduce capital spending in a move to stave off bankruptcy. Earlier, it was estimated to be around $400 million, but now it has been reduced by $150 million to provide sufficient strategic investment and digital capabilities.
Ryan Cohen’s sell off triggered the worst one-day pullback in the history of Bed Bath & Beyond stock. Some retailers admitted that the move caught them unawares.
The New Jersey-headquartered company has managed to secure $500 million in financing to help it weather the storm. Meanwhile, analysts remain cautious about its attempts to turn around a sinking ship. One even compared it to rearranging deck chairs on the Titanic. The firm will continue to evaluate its portfolio and leases as part of its “go-forward strategy.”
Reports have also surfaced claiming that suppliers have halted shipments to Bed Bath & Beyond citing unpaid bills. The firm has been bleeding customers as people found cheaper alternatives online and its shares became a “meme stock” due to its volatility. A lot of interest was generated in the meme stock due to Ryan Cohen’s involvement, who is mostly popular for rallying around GameStop in 2020.
In July, one analyst had raised alarm over worsening conditions at the company and mentioned that some Bed Bath & Beyond stores cut down on air conditioning and other utilities in stores to keep costs low. The company, however, vehemently denied the accusations.
In the written statement, Gove continued, “We are working swiftly and diligently to strengthen our liquidity and secure our path for the future. We have taken a thorough look at our business, and today, we are announcing immediate actions aimed to increase customer engagement, drive traffic, and recapture market share. This includes changing our merchandising and inventory strategy, which will be rooted in National Brands. Additionally, we are focused on driving digital and foot traffic, as well as optimizing our store fleet. We believe these changes will have a widespread positive impact across customer experience, inventory assortment, supply chain execution and cost structure. The customer underpins our decisions, and we are committed to delivering what they want while driving growth, profitability, and financial returns.”
