Bed Bath & Beyond warns it may go out of business

Bed Bath & Beyond said it might not be able to continue as a going concern, bringing another U.S. retail chain to the precipice of bankruptcy.

The Union, New Jersey-based company said it’s pursuing an array of strategic alternatives, including restructuring debt, selling assets or filing for bankruptcy-court protection, but “these measures may not be successful.”

The company operates stores at 5826 N. Division St. in Spokane, at 440 W. Wilbur Ave., in Coeur d’Alene and at 1966 Pullman Road in Moscow, Idaho.

Some suppliers had begun to halt shipments to the retailer in recent months, concerned about the company’s outlook. That aggravated the already tenuous financial situation facing the company.

The retailer – for decades a mainstay of malls and shopping centers around the U.S. – was plagued by years of management missteps and a dysfunctional corporate culture that left it ill-equipped to compete against Amazon.com and other online retail juggernauts.

The company is continuing to pursue steps to improve its cash position, it said in a filing Thursday, but its recurring losses and negative cash flow in the nine months ended Nov. 26 leave “substantial doubt” that the company can stay in business.

Bed Bath & Beyond also called off a planned debt exchange in connection with the warning.

It had offered creditors the chance to swap unsecured bonds for a lower face value amount of new secured obligations to trim the company’s overall debt load.

Following the announcements, Bed Bath & Beyond’s bonds fell to new lows.

Its 2024 notes traded down to 21 cents on the dollar, from around 23 cents Wednesday, and its 2034 notes fell to 8 cents on the dollar, from around 10 cents, according to Trace.

Bed Bath & Beyond warned on Thursday that it expects to report third-quarter revenue of $1.259 billion, below the $1.404 billion analysts had estimated.

That’s a steep decline from the $1.878 billion the company reported a year ago. Losses are also mounting at the retailer.

Bed Bath & Beyond said it expects to report a net loss of approximately $385.8 million for the three months that ended on Nov. 26 versus $276.4 million in the year ago period.

The drop in third-quarter sales and the widening losses are particularly problematic because U.S. consumers were spending more robustly during those months – stepping up purchases during Black Friday, for example, and gearing up for the rest of the holiday shopping season.

Those metrics mean that Bed Bath & Beyond will need to raise more funds to continue operating, said Neil Saunders, a U.S.-based analyst at consulting company GlobalData.

“With confidence from investors and suppliers at an all-time low, getting the credit needed will become much more challenging, if not impossible,” he wrote in a note to clients.

The company could seek to sell its Buybuy Baby chain, which has attracted investor interest in the past, but that would likely be a challenge given the financial outlook. Bankruptcy, Saunders said, is the most likely outcome.

The company said it will report its third-quarter results on Jan. 10, which is delayed compared with previous years.

Executives will hold a conference call with analysts at 8:15 a.m. New York time that day.

During the pandemic, the company increased its offering of private-label products – a change that kept many loyal customers away.

Earlier this year, as part of a broader turnaround plan, Bed Bath & Beyond said it was pivoting back to selling well-known national brands such as Oxo, Ninja and SodaStream, but many shoppers had already stopped turning to the company for products.

“Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints,” Bed Bath & Beyond Chief Executive Officer Sue Gove said in a statement.

But, she added, “we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors. We have seen trends improve when in-stock levels have increased.”

Shares of Bed Bath & Beyond fell 21% at 9:57 a.m. New York time. The stock had already lost more than 83% of its value since the end of 2021.