Embattled retailer, Bed Bath & Beyond
In fact, it's more like a return to Bed Bath & Beyond's status prior to the pandemic, when it was struggling as consumer spending at physical stores was drying up, and the company was failing to make up for it with online sales. Of course, the pandemic was a huge boost for the company as spending on household items soared, fueled by stimulus payments. Now, the situation has normalized, and the company is facing the same problems that were avoided over the last couple of years due to the combination of unusual circumstances.
The company warned that it may not have enough cash to cover operating expenses like lease agreements and payments to suppliers. The company is considering its options including restructuring, selling assets, or tapping capital markets. Commensurately, the stock price has plunged, while the bond markets show that creditors are not confident that they would get all their money back.
Some of the company's challenges include not enough traffic to its stores and website in addition to difficulty getting enough merchandise to fill its shelves. This isn't exactly surprising as Bed Bath & Beyond's prospects are closely tied to the housing market which has been essentially frozen over the past year. And, it wasn't surprising that its business boomed during the pandemic as the housing market was on fire.
Another challenge for the company is its massive debt load. Currently, the company has $1.2 billion in debt vs a market cap of $149 million. The company has maturity dates of 2024, 2034, and 2044. Based on its current burn rate, it's unlikely that the company can meet these obligations without a radical change in the business or macro conditions.
The company is already in the midst of a turnaround as former CEO Mark Tritton was replaced in June by current CEO Sue Gove and former CFO Gustavo Arnal passed away. Gove's plan is to reduce the number of stores and staff and move away from its private label strategy. She also raised $500 million in financing to provide a longer lifeline.
Still, these efforts have failed to generate much traction as sales in Q3 dropped from $1.9 billion last year to $1.2 billion this year. Its loss also widened to $385 million which is nearly 50% worse than last year.
