Bed Bath & Beyond Leaders to Address Bankruptcy Risk on Earnings Call

When Bed Bath & Beyond Leaders will speak to investors Tuesday morning. They won’t just report on sales and earnings results. They will have to face a grim reality: Cash-strapped home goods retailer is running short of time.

Thursday: Bed Bath It may be required to file for bankruptcy. It warned that it may soon find itself unable to pay its costs due to sales lags and a decrease in store traffic. It stated that it was having difficulty keeping stock items because of its cash shortage and the need to fix strained relationships it has with suppliers.

This national chain is known for its 20% coupon and the sky-high piles and towels of towels and other housewares. It could soon join the ranks of those retailers that have closed down stores and disappeared. Think, Sears. Circuit City. RadioShack. Pier 1. Linens & Things

The attempted turnaround occurs at the same moment that inflation weighs heavily on consumers’ wallets, and the housing market is hit with higher interest rates. Additionally, the older years of spending have been spent. The Covid pandemic More people choose to spend their money at home on eating out and booking trips, rather than purchasing cookware, a duvet, or throw pillows.

“When you have a shift in how consumers are allocating their spending, and a recession looming potentially on the horizon, it makes it much more of an uphill battle,” Justin Kleber, Baird Equity Research’s senior research analyst, said:

The company’s stock performance also reflects the company’s difficult path forward. On Friday, shares fell to a 52 week low. They were trading at $1.62 as of Monday’s close for a market capitalization of less than $150 millions.

Bed Bath Its latest turnaround strategy was laid out In August. It called for drastic cost reductions, including closing 150 of the store’s namesake locations and reducing its headcount by 20% in its supply chain and corporate workforce.

Those efforts have brought its operating costs down, as it tries to drive up sales: For the third quarter, Bed Bath expects operating expenses to be about $583.6 million, compared with about $698 million in the year-ago period, it said Thursday.

The company’s turnaround strategy included phasing out certain private labels and bringing back better-recognized national brand names. It pledged in August to work with those national brands to develop exclusive items and to add items from direct-to-consumer brands — merchandise aimed at setting it apart and giving shoppers a reason to come back to its stores.

Investors will be eager to hear from the company Tuesday whether it has increased its inventory, secured any holiday-specific items and how willing vendors were to work with them. It could be a sign of hope that Bed Bath is making significant progress in improving its inventory.

“Being the first to bring new brands and products to our customer has always been one of our roles as a retailer,” Mara Sirhal, Executive Vice President, spoke to investors at an Aug. 31 update on business. “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.”

Incentives for emerging direct-to consumer brands to partner with brick and mortar shops like Bed Bath & Beyond are compelling TargetThese are great because they allow you to reach more customers. However, there have been steep marketing costs, and changes in consumer habits that have reduced profitability since the pandemic. 

However, brands and vendors were reluctant to extend credit to Bed Bath because of its growing debt. This cast doubt on its ability to repay its bills. 

Overall, sales trends remain weak.

The company said Thursday it expects net sales for the fiscal third quarter, which ended Nov. 26, to be about $1.26 billion — a nearly 33% drop from the $1.88 billion it reported for the year-ago period. Bed Bath anticipates a net loss of about $385.8 million for the quarter, an approximately 40% jump in losses year over year. The quarterly losses are inclusive of an impairment charge of about $100 million. This was not stated.

Sue Gove, CEO of the company, urged patience and said that it would take time for things to turn around. After a long wait, she was appointed to the helm. Mark Tritton, former CEO, was fired June

“Transforming an organization of our size and scale requires time, and we anticipate that each coming quarter will build on our progress,” In a news release, she stated that.

Baird’s Kleber said investors will want to hear if there’s been a change in sales trends during the Christmas season — key weeks that would be reflected in fourth-quarter results, but could be previewed sooner.

Bed Bath must address a fundamental problem before it can move product off shelves. It needs to have enough merchandise to fill them.

Gove claimed that part of the reason for the anticipated third-quarter losses was low inventory.

Gove stated that Bed Bath uses the dollars it made during the holiday season to stock up its shelves and get help from key vendors. Sales trends have also improved with an increase in stock levels, she stated.

However, it is not clear if this will be enough.

“At the end of the day, all of the yabba dabba doo about their newly minted strategy that they were touting over the last six months. It’s all just a lot of talk,” Mark Cohen is a Columbia Business School professor and director of retail studies.

Cohen said that he regards the going-concern warning to be the “kiss of death” for Bed Bath, solidifying bankruptcy as the retailer’s only remaining option — beyond a savior swooping in with an infusion of cash or to buy a stake of the company.

“Without a defining event of that sort, this company is toast,” Cohen, the former CEO at Sears Canada.