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Bed Bath & Beyond warns of possible bankruptcy

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A Bed Bath & Beyond store is seen on June 29, 2022 in Miami, Florida.

Joe Raedle | Getty Images News | Getty Images

bed bath and beyond warned on Thursday that it is running out of cash and is considering bankruptcy.

The retailer, citing worse-than-expected sales, has issued a “continuity” warning that in coming months it will likely run out of cash to cover expenses such as lease agreements or supplier payments. The company said it is exploring financial options such as restructuring, seeking additional capital or selling assets, as well as a possible bankruptcy.

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Shares in the company plunged 23% in early trading after Bed Bath released updates to a pair of financial filings.

Still, CEO Sue Gove said the retailer is focused on rebuilding the business and ensuring its brands, Bed Bath & Beyond, Buybuy Baby and Harmon, “remain the destinations of choice for customers going forward.”

Among its challenges, Bed Bath said it is having trouble getting enough merchandise to fill its shelves and is attracting fewer customers to its stores and website.

The retailer also said it had not been able to refinance some of its debt, less than a month after notifying investors that it planned to borrow more to pay off parts of existing obligations.

Bed Bath’s debt burden is weighing heavily on the company. The retailer has nearly $1.2 billion in unsecured notes, with due dates in 2024, 2034 and 2044. In recent quarters, Bed Bath has warned that it’s running out of cash fast.

All of Bed Bath’s notes are trading below par, a sign of financial distress.

paralyzed rotation

Bed Bath went through an especially tumultuous period, with the departure of its CEO and other top executives, company-wide layoffs, store closures and an overhaul of its merchandise strategy. As sales declined, its CEO Mark Tritton was fired in June. Gove, who took over as interim CEO, took the role permanently.

She plotted a comeback strategy in late August. As part of the plan, she said the company would reduce costs by decreasing its store presence and workforce. It said it would add back more items from popular national brands as it moved away from an aggressive private label strategy. And she said she has secured more than $500 million in new financing to help stabilize the business.

The company said during its latest earnings report that it believed it had sufficient liquidity to move forward.

In a press release on Thursday, Gove said the recent sales results illustrate why this turnaround plan is so important.

“Transforming an organization of our size and scale takes time, and we anticipate that each coming quarter will build on our progress,” she said.

The company is also looking for a chief financial officer after executive Gustavo Arnal committed suicide in September.

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increasing losses

So far, Bed Bath has not seen its sales trends change. Net sales for the fiscal third quarter, ended Nov. 26, are expected to be about $1.26 billion – a sharp drop from $1.88 billion for the same period a year earlier, the company said.

It forecast a net loss of about $385.8 million for the third quarter, a nearly 40% jump in year-over-year losses. Quarterly losses include a depreciation charge of approximately $100 million, which was not specified.

The company will report full quarterly results and host an earnings conference call on Tuesday.

Signs of Bed Bath’s financial distress also appeared on store shelves. As the retailer’s cash reserves dwindle, some suppliers are unwilling to ship large amounts of merchandise—or, in some cases, any merchandise at all—to the company.

Gove said in a press release that the lowered credit limits mean customers are seeing emptier shelves and less variety than they expected. She said the company is using the money it earned during the holiday season to pay suppliers and order more inventory.

“We’ve seen trends improve when inventory levels rise,” she said.

Bed Bath already has a history of tense relationships with major national brands such as Dyson, Keurig and Cuisinart. During past holiday seasons, Bed Bath lacked popular gift items like KitchenAid stand mixers. Meanwhile, these items were plentiful at competitors like Target.