A pedestrian walks past a Bed Bath & Beyond store in San Francisco, California.
Justin Sullivan | Getty Images
When bed Bath and Beyond When leaders spoke to investors Tuesday morning, they wouldn’t just report sales and earnings results. They have to address a harsh reality: The cash-strapped home goods retailer is running out of time.
bed bath on thursday warned that he might have to file for bankruptcy, adding that it may soon be unable to cover costs as sales slump and store traffic declines. It also said it is struggling to keep items in stock, as it runs low on cash and works to mend strained relationships with suppliers.
The nationwide chain, known for its 20% off coupons and sky-high hauls on towels and home goods, is at growing risk of joining the list of retailers who have closed stores and turned away . Think, Sears. Circuit City. radio Shack. Pier 1. Linens n Things.
What’s more, the attempted changes come at a time when inflation weighs on consumers’ wallets and the housing market is hit by higher interest rates. Also, after spending the pre-pandemic years at home, more people are choosing to spend money on eating out or booking trips rather than buying cookware, quilts or pillows.
“When you have a change in how consumers are allocating their spending, and a recession potentially looming on the horizon, it becomes an uphill battle,” said Justin Kleber, senior research analyst at Baird Equity Research. “
The company’s stock performance also reflects its difficult path. On Friday, the company’s shares had touched a 52-week low. As of early Monday, shares were trading around $1.74 for a market value of just under $151 million.
chasing comeback
bed Bath presented its latest turnaround plan in August. The plan called for drastic cost-cutting by way of closing about 150 of its namesake stores and reducing the numbers in its corporate and supply chain workforce by about 20%.
Those efforts have reduced its operating costs as it tries to grow sales: For the third quarter, Bed Bath expects operating expenses to be about $583.6 million, compared with about $698 million in the year-ago period. Was, said on Thursday.
The company’s turnaround strategy also includes phasing out some of its private labels and bringing back more well-known national brands. It pledged in August to work with those national brands to develop exclusive items and add items from direct-to-consumer brands — merchandise intended to differentiate it and give shoppers a reason to keep coming back to its stores. .
Come Tuesday, investors will want to hear whether the company has improved its inventory levels, if they’ve managed to secure any particular items for the holiday season and how willing sellers are to work with the retailer. If Bed Bath makes significant progress in improving inventory, it could offer a glimmer of hope for the coming quarters.
“Being the first to bring new brands and products to our customer has always been one of our roles as a retailer,” Executive Vice President Mara Sarhal told investors during an August 31 business update. “In the domestic market, there are many d2c brands that bring their own compelling brand marketing and followers who know and want them but are not widely available to purchase.”
Emerging Direct-to-Consumer Brands There’s an incentive to partner with brick-and-mortar stores like Bed Bath and TargetBecause they provide a way to reach more customers and respite from the e-commerce cooldown, heavy marketing costs and consumer habit changes that have cut into profitability since the start of the COVID pandemic.
But brands and sellers are hesitant to extend credit to Bed Bath as its mounting debt casts doubt on its ability to pay bills.
And overall sales trends have been weak.
The company said Thursday it expected net sales for the third quarter, which ended Nov. 26, to be about $1.26 billion — up nearly 33 percent from the $1.88 billion it reported for the year-ago period. % was less. Bed Bath is forecast to have a net loss of approximately $385.8 million for the quarter, a nearly 40% increase in losses year over year. Those quarterly losses included an impairment charge of approximately $100 million, which was not specified.
CEO Sue Gove urged patience on Thursday, saying change will take time. He then took command Former CEO Mark Tritton was ousted In June.
“An organization of our size and scale requires time to transform, and we look forward to each coming quarter building on our progress,” she said in a news release.
Baird’s Kleber said investors will want to hear whether sales trends have changed during the Christmas season — critical weeks that will be reflected in fourth-quarter results but may be previewed sooner.
‘kiss of death’?
Before Bed Bath can work on moving product off the shelves, though, it needs to tackle an even more fundamental problem: having enough merchandise to fill them.
Gove said the lower inventory was partly responsible for the company’s projected third-quarter loss.
Gove said the company is using the dollars it earns during the holiday season to bulk up shelves with the help of its key vendors. As the stock levels have improved, so has the sales trend, he said.
But it is not clear whether this will be enough.
“At the end of the day, all Yabba Dabba Doo touts is their newly created strategy that they’ve been touting for the past six months. It’s all just a lot of talk,” said Mark Cohen, a professor and director of retail studies Told. Columbia Business School.
Cohen said he sees the going-concern warning as the “kiss of death” for Bed Bath, solidifying bankruptcy as the retailer’s only remaining option — along with an infusion of cash or buying a stake in the company. For beyond a savior.
“Without that kind of defining event, this company is toast,” said Cohen, the former CEO of Sears Canada.