BBBY Stock: What Next For Bed, Bath & Beyond After Bankruptcy Concerns?
January 11 2023 - 04:45AM
Finscreener.org
Last week one of the world’s
largest retailers, Bed Bath & Beyond
(NYSE:
BBBY), warned of
potential bankruptcy. Shares of the company fell 47% last week and
are currently trading 98% below all-time highs, valuing it at a
market cap of $295 million.
Bed Bath & Beyond issued a
“going concern” warning due to lower-than-expected sales and rising
debt, making it difficult for the company to cover expenses such as
supplier payments and lease agreements. It is also considering
options, including corporate restructuring, raising additional
capital, or selling assets.
Last September, Bed Bath
announced plans to close 150 stores, reduce its workforce by 20%,
and raise $500 million in financing. The struggling retailer
expects net losses to rise 40% year over year to $386 million in Q3
(ended in November), while sales are forecast to slump by
33%.
Bed Bath ended the most recent
quarter with $1.2 billion in unsecured notes. It also failed to
refinance a portion of its debt. Last month it notified investors
about plans to increase borrowings to pay off upcoming debt
obligations.
Can BBBY stock gain pace in
2023?
Bed Bath & Beyond confirmed
it struggling to keep stock of inventory as its running low on cash
coupled with a strained relationship with suppliers. The retail
company may find it difficult to stage a turnaround this year as
consumers are wrestling with inflation and higher interest rates.
Further, there is a shift in consumer spending due to the reopening
of economies driving down sales of items such as cookware, duvets,
or pillows.
Bed Bath’s cost-cutting efforts
since September 2022 allowed the company to end fiscal Q3 with
operating expenses of $583.6 million, lower than expenses of almost
$700 million in the year-ago period.
But its turnaround strategy also
included phasing out private label brands to accommodate
well-recognized brands and drive sales higher. Investors would want
to know if this allowed Bed Bath to improve inventory levels or if
the company managed to secure exclusive products for the
all-important holiday season.
Last year, Bed Bath’s Executive
Vice President, Mara Sirhal, stated, “Being the first to bring new
brands and products to our customer has always been one of our
roles as a retailer. In the home market, there’re many D2C brands
which bring their own compelling brand marketing and followers who
know and want them but aren’t widely available to shop.”
Several emerging D2C
(direct-to-consumer) brands are looking to partner with retail
stores, including Bed Bath, in order to reach a wider base of
consumers. However, Bed Bath’s weak financials and mounting debt
has not allowed the company to partner aggressively with D2C
brands.
A look at upcoming quarterly results
Bed Bath forecast net sales of
$1.26 billion in fiscal Q3 of 2023 (ended in November), a decline
of 33% year over year. Its net losses are expected to surge 40%
year over year to $385.8 million, including an impairment charge of
$100 million. Since Q1 of 2019, Bed Bath has reported an operating
profit in just a single quarter.
Bed Bath may still manage to turn
around its operations, but it is very unlikely for the company. Bed
Bath CEO Sue Gove explained, “Transforming an organization of our
size and scale requires time, and we anticipate that each coming
quarter will build on our progress.”
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