Bed Bath & Beyond Reports Deeper Losses Than Prior Warnings

A customer leaves a Bed Bath & Beyond store in Oakland, Calif., on Aug. 31, 2022. Justin Sullivan/Getty Images

Bed Bath & Beyond (BBBY) reported deeper losses than expected after the company announced last week that it might have to seek bankruptcy.

The home goods retailer witnessed a net loss of $393 million for the third quarter, more than the $366 million net loss in the second quarter. Analysts last week had originally expected a $386 million loss for the quarter.

The company is struggling to keep its shelves stocked while it edges toward the brink of bankruptcy, as some suppliers began to halt shipments in recent months due to concern about its future outlook.

Several executives had told The Wall Street Journal that BBBY was running low on funds and that it was considering several options, including planning for a Chapter 11 bankruptcy filing.

BBBY Attempts to Appease Its Vendors

“At the beginning of the third quarter, we initiated a turnaround plan anchored on serving our loyal customers, following a period when our merchandise and strategy had veered away from their preferences,” said BBBY CEO Sue Gove in a press statement on Jan. 10.

She stated that store inventory was tight during the third quarter and that credit constraints and increasing demands from vendors for payments have made it harder for the company to keep its shelves stocked during the period.

Gove said that when stock levels eventually improve, sales would hopefully rise as well.

Gove held a supplier summit last September in attempt to convince BBNY vendors of its new turnaround strategy.

However, many were left skeptical that the company would be able to win back customers, and have pressed for better payment terms or stopped shipments altogether, reported The Wall Street Journal.

New CEO Says That the Retailer Will Offer Marketing Strategy

The company is recovering from a failed makeover attempt that replaced store name brands with private-label goods, which caused sales to drop.

“Although we moved quickly and effectively to change the assortment and other merchandising and marketing strategies, inventory was constrained, and we did not achieve our goals,” said the CEO.

She said that the company will from now be “actively pursuing higher in-stock levels to meet proven demand” and that they would be “implementing our plan expeditiously while managing our financial position in a changing landscape.”

Gove said that the company will be working to improve its inventory while also getting more national brands and refining its offerings of private label products.

“We will continue to rebalance our assortment toward national brands and refine our own brands mix to reflect the deep understanding of our customer, along with the selection and value only we can offer in the home and baby markets. We are actively pursuing higher in-stock levels to meet proven demand,” she said.

Company Restructures Its Finances as It Struggles for Survival

The retailer is pushing through $80–100 million in corporate cost savings, including an unspecified number of job cuts, said Gove.

BBBY also reported that it had closed the quarter with about $200 million in funds, equivalents, and investments remaining, with a total liquidity in savings of about $500 million.

The company reported an operating cash flow at a deficit of approximately $307.6 million.

The retailer has faced six double-digit consecutive quarterly declines in sales.

Net sales in the three months ended Nov. 26 fell around 33 percent, to $1.26 billion, compared with $1.88 billion a year earlier.

Gove said that BBBY’s plunge in sales was driven by its attempts to end its private-label brand strategy and its generous discount offering during the quarter.

She told analysts that private-label penetration had fallen 10 percent in the third quarter, compared with the first half of the fiscal year, which began in February.

The CEO said that the retailer was on track to shutter the 150 lower-performing stores that it had targeted for closure in August 2022 as part of its broader cost-cutting plan,

BBNY was able to secure $500 million in financing in August, which allowed it to make it through the critical holiday season, while it tried to reduce its debts and reassure vendors, reported The Wall Street Journal.

The retailer was also able to reduce its interest expenses and extend its maturities, while requiring its investors to take substantial haircuts on their principal.

However, BBBY failed to gain enough support from its creditors last week for a proposed exchange of its unsecured senior notes, reported The Wall Street Journal.

New CEO Reverses Course in Sales Strategy

The former CEO, Mark Tritton, who was held responsible for the aborted private-label sales strategy, resigned in June, followed by the resignation of other senior executives. Meanwhile, BBBY CFO Gustavo Arnal killed himself during the summer.

Gove, a former retail executive and Bed Bath & Beyond director, became the permanent CEO in October 2022 after being appointed on an interim basis when Tritton left the company.

BBBY’s shares closed on Jan. 10 at $2.07, up nearly 28 percent, or $0.45, for the day.

Shares of the company have fallen 85 percent over the past year.