Bed Bath & Beyond is fighting to keep another B word out of its name: bankruptcy. On August 31, the company announced some changes to boost profitability as the brand strives to improve its balance sheet.
The home goods supplier revealed that it plans to cut its workforce by 20%, close nearly 150 stores and close some of its house brands.
In bed with bankruptcy
Sue Gove, Director and Acting Chief Executive Officer, said: “We embrace a simple, back-to-basics philosophy that focuses on better service to our customers, business growth and profitability. In a short time, we have made significant changes and instituted enablers across our business to regain our dominance as the preferred shopping destination for our customers’ favorite brands and exciting products. We have a special presence in the home and baby markets, and we intend to seize our opportunity to be the retailer of choice in the category. »
The company plans to turn around the situation by reducing its selling, general and administrative (SG&A) expenses to $250 million in fiscal 2022. The announcement was met with skepticism by Wall Street and its shares plunged by almost 21%. In early August, shares of Bed Bath & Beyond had fallen to $4.89 per share before rising to $30 in mid-August. Investor Ryan Cohen sold his stake in the home goods company, triggering a wave of panic on risk-averse Wall Street. But the stock rebounded after rumors the company would receive another round of funding.
The company also revealed that it would cut capital expenditures in order to avoid bankruptcy. Previously, it was estimated at around $400 million, but has now been reduced by $150 million to provide sufficient strategic investments and digital capabilities.
The sale of Ryan Cohen triggered the worst one-day decline in Bed Bath & Beyond stock history. Some retailers admitted that the move caught them off guard.
The New Jersey-based company managed to secure $500 million in funding to help it weather the storm. Meanwhile, analysts remain cautious about his attempts to overturn a sinking ship. One even compared it to the reorganization of the lounge chairs on the Titanic. The company will continue to evaluate its portfolio and leases as part of its “strategy for the future”.
Reports have also surfaced claiming suppliers have halted shipments to Bed Bath & Beyond citing unpaid invoices. The company bled its customers as people found cheaper alternatives online and its shares became a “meme stock” due to its volatility. A lot of interest has been generated in the meme stock due to the involvement of Ryan Cohen, who is mostly popular for rallying around GameStop in 2020.
In July, an analyst sounded the alarm over deteriorating conditions at the business and mentioned that some Bed Bath & Beyond stores had cut air conditioning and other in-store utilities to keep costs down. The company, however, vehemently denied the charges.
In the written statement, Gove continued: “We are working quickly and diligently to strengthen our liquidity and secure our path for the future. We took a deep dive into our business and today we are announcing immediate actions to increase customer engagement, drive traffic and regain market share. This includes modifying our merchandising and inventory strategy, which will be anchored in national brands. Additionally, we are focused on driving digital and foot traffic, as well as optimizing our store base. We believe these changes will have a broad-based positive impact on customer experience, inventory mix, supply chain execution and cost structure. The customer drives our decisions and we are committed to providing them with what they want while driving growth, profitability and financial returns. »