The management of Bed Bath & Beyond will not only discuss sales and profit statistics when they address investors on Tuesday morning. They will have to face an unavoidable fact: the struggling home goods firm is out of money and time.
Bed Bath & Beyond issued a bankruptcy warning on Thursday, saying it may soon be unable to meet expenditures due to falling revenues and customer foot traffic. It also noted that it is having trouble maintaining adequate inventory levels due to a lack of cash and efforts to mend damaged ties with suppliers.
The national brand, famous for its 20% off coupons and mountainous stacks of towels and home goods, is increasingly in risk of joining the ranks of companies that have gone out of business. Remember Sears. It’s time to head to Circuit City. RadioShack. Pier 1. Home Goods and Linens.
The planned turnaround also occurs at a time when inflation is putting pressure on consumers’ budgets and when increased interest rates are hurting the housing market. In addition, after staying indoors for so long during the first few years of the Covid epidemic, many individuals are opting to spend their money on going out to restaurants or planning vacations instead of stocking up on kitchen supplies or soft furnishings.
“When you have a shift in how consumers are allocating spending and a recession hanging potentially on the horizon, it makes it much more of an uphill struggle,” said Justin Kleber, senior research analyst at Baird Equity Research.
The stock price decline is a reflection of the company’s arduous future. On Friday, the stock price of the corporation dropped to a new 52-week low. There was less than $150 million worth of them as of Monday’s end when they were selling at roughly $1.62.
In search of a revival
In August, Bed Bath outlined its latest plan to bring the company around. The strategy planned for significant savings by eliminating around 20% of the corporate and supply chain employees and shutting down around 150 of its namesake locations.
Its attempts to boost sales have resulted in lower operational expenses. According to a statement released Thursday, Bed Bath & Beyond anticipates operating expenditures for the third quarter of 2018 to be around $583.6 million, down from over $698 million in the same period last year.
Part of the company’s plan to turn things around was to stop producing its own private labels and start selling more well-known national brands again. In August, the company made a commitment to collaborate with these major companies to produce unique things and to add items from direct-to-consumer businesses, all with the goal of providing its stores with merchandise that would set it apart from the competition and entice customers to return.
On Tuesday, shareholders will want to know whether or not stock levels have been increased, if any holiday-specific exclusives were acquired, and how cooperative suppliers have been. If Bed Bath & Beyond has made considerable strides in enhancing inventory, that might be a promising omen for the coming quarters.
Executive Vice President Mara Singhal said in a business report to investors on August 31 that one of the company’s responsibilities as a retailer has always been to introduce new brands and items to customers early. Many direct-to-consumer (D2C) firms have dedicated fans in their local market despite the limited availability of these products.
New direct-to-consumer brands can benefit from forming partnerships with traditional retailers such as Bed Bath & Beyond and Target because these stores provide an outlet from the e-commerce slowdown, high marketing costs, and changes in consumer habits that have eroded their profits since the pandemic’s decline.
But because of Bed Bath’s rising debt, many suppliers and manufacturers have been unwilling to offer credit to the company.
And overall sales trends have not improved.
On Thursday, the firm revealed that it expected net sales for the fiscal third quarter, which concluded on November 26th, to be around $1.26 billion, down roughly 33% from the $1.88 billion it recorded for the same time a year earlier. It is expected that Bed Bath would lose over $385.8 million this quarter, up around 40% from last year’s loss levels. A non-specific impairment charge of around $100 million is included in those quarterly deficits.
On Thursday, CEO Sue Gove asked for patience, stating that the turnaround will take some time. After the dismissal of former CEO Mark Tritton in June, she stepped into his shoes.
An organization of our size and scope cannot be transformed overnight, and we expect to make further strides in the coming quarters, she said in a press statement.
In an interview with Baird, Kleber noted that investors are interested in learning whether or not there has been a shift in sales trends throughout the holiday season. This shift would be reflected in the company’s fourth-quarter results, but a preview of these data is available earlier.
Cruel and deadly embrace?
However, there is a more basic issue that must be addressed before Bed Bath can focus on getting stuff off shelves.
In an interview with CNBC, Gove blamed insufficient inventories for the company’s expected losses in the third quarter. According to Gove, Bed Bath & Beyond is utilizing Christmas sales revenue to purchase more inventory from its most important suppliers. She saw an uptick in sales activity and an increase in available inventory.
However, it’s unclear if that will be sufficient.
All the yabba dabba doo about their brand new plan that they’ve been promoting for the past six months has been for naught in the end. Professor and director of retail studies at Columbia Business School Mark Cohen called it “simply a lot of chatter.”
According to Cohen, the going-concern warning is the “kiss of death” for Bed Bath, leaving bankruptcy as the only viable option for the shop barring the arrival of a rescuer with an influx of cash or the purchase of a part in the firm.
“Without a defining event of that nature, this firm is doomed,” Cohen, the former CEO of Sears Canada, warned.