Bed Bath and bankruptcy

July 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

July 2023 Issue

Bed Bath & Beyond Inc filed for Chapter 11 bankruptcy protection in a District of New Jersey court in April, after the home goods retailer failed to secure the funds it required to stay afloat.

According to a court filing, the company listed both its estimated assets and liabilities in the range of $1bn to $10bn. The company said that it has received a commitment of approximately $240m in debtor-in-possession financing from Sixth Street Specialty Lending Inc and begun a liquidation sale. The company intends to use the Chapter 11 proceedings to conduct a limited sale and marketing process for some or all of its assets.

Bed Bath & Beyond also noted that its 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue serving customers as it starts efforts to effect the closure of its retail locations.

A retail giant which rose to prominence in the 1990s, Bed Bath & Beyond has faced financial troubles for years. Prior to the filing, the company had said it would cut jobs and close 150 stores this year. In March, it also announced that it would sell $300m worth of its shares and warned that it might have to file for bankruptcy if the funds were not secured.

In its Chapter 11 filing the company noted that “the past twelve months have undoubtedly been the most difficult and turbulent in Bed Bath & Beyond’s storied history”. It added that despite “painstaking, creative, and exhaustive efforts to right the ship along the way, Bed Bath & Beyond is simply unable to service its funded debt obligations while simultaneously supplying sufficient inventory to its store locations”.

“Millions of customers have trusted us through the most important milestones in their lives – from going to college to getting married, settling into a new home to having a baby,” said Sue Gove, president & chief executive of Bed Bath & Beyond. “Our teams have worked with incredible purpose to support and strengthen our beloved banners, Bed Bath & Beyond and buybuy BABY. We deeply appreciate our associates, customers, partners, and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders.”

The company employs 14,000 workers, according to the court filing, although this is down from the 32,000 employees it had in February 2022. Originally founded in 1971 as Bed ‘n Bath, the company expanded its offering to all manner of home furnishings and electronics in the subsequent decades. In the 2010s, Bed Bath & Beyond was the largest home furnishing retailer in the US, with more than 970 stores across all 50 states of the US. However, in recent years it has struggled with dwindling profits as more customers chose to shop online. Indeed, the company’s lack of online strategy, as well as stiff competition from other big box retailers, such as Target and Walmart, placed Bed Bath & Beyond in an increasingly difficult position.

Furthermore, while many companies used the coronavirus (COVID-19) pandemic to ‘rightsize’ and reorient their operations, and invest more heavily in online sales, Bed Bath & Beyond failed to capitalise on the opportunity, leaving it even further behind its competitors. Supply chain issues have also negatively impacted the company of late.

Earlier this year, the company said it had secured more than $500m, but that was insufficient and failed to prevent its downfall. The company raised the alarm about its finances on several occasions throughout the first quarter of 2023, including saying in January that it was in default of its loans.

An expensive share repurchasing scheme has also contributed to the company’s financial difficulties. Since 2004, Bed Bath & Beyond has spent over $11.8bn on its own stock, more than twice the $5.2bn in debt it had on its books in its most recent US Securities and Exchange Commission (SEC) filing. The company was engaged in an active share repurchase programme until February 2022, spending $230m on shares in an accelerated repurchase programme over the course of three months, spending an average of $16.04 on each share.

Richard Summerfield