One more failure, and it's not a small one. A few weeks after the banking sector was shaken by failures, the retail industry is in turn experiencing a colossal bankruptcy.
Bed Bath & Beyond, a household name, has filed for Chapter 11 bankruptcy protection with plans to close all its stores, wind down its businesses and liquidate its assets, a decision which indicates that the company's various turnaround plans have failed.
"Bed Bath & Beyond Inc. today announced that it and certain of its subsidiaries (collectively, "the Company") filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for the District of New Jersey (the "Court") to implement an orderly wind down of its businesses," the company said in a statement on April 23.
It added that it will conduct "a limited marketing process to solicit interest in one or more sales of some or all of its assets."
Stores Will Remain Open ... for Now
The Chapter 11 bankruptcy filing protects Bed Bath & Beyond from its creditors, with whom the company will now seek to restructure its debt. At the same time, Bed Bath & Beyond stores will remain open, and it will continue to operate its stores.
"The company's 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue serving customers, as the company begins its efforts to effectuate the closure of its retail locations," the firm said.
Bed Bath & Beyond, which has been shutting down hundreds of stores in locations that had little foot traffic and declining sales, said that it intends to uphold its commitments to customers, employees, and partners, including the continued payment of employee wages and benefits, maintaining customer programs and honoring obligations to critical vendors.
To be able to finance the continuation of its operations while awaiting its liquidation, Bed Bath & Beyond, which was falling behind on payments, indicated that it has received a commitment of approximately $240 million in debtor-in-possession financing from Sixth Street Specialty Lending.
"Our teams have worked with incredible purpose to support and strengthen our beloved banners, Bed Bath & Beyond and buybuy BABY," said Sue Gove, President & CEO of Bed Bath & Beyond Inc. "We deeply appreciate our associates, customers, partners, and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders."
Huge Debt
Bed Bath & Beyond did not manage to adapt to changes in consumer habits. The last attempt of a comeback was launched last August, after the company received a loan of $375 million. But in January, Bed Bath & Beyond warned that it was close to filing for bankruptcy as sales had slumped even over the holidays, which is usually the busiest time for many retailers.
It received a last minute infusion of capital from Hudson Bay Capital on Feb. 7. The hedge fund agreed to invest $1 billion in the retailer in the form of convertible preferred stock and warrants -- an immediate infusion of $225 million and a maximum $800 million over a period of several years. The lifeline came with some conditions, like stock-price minimums, but the company was not able to meet them. As a result, the deal was terminated.
In its filing, Bed Bath & Beyond said it had assets of $4.4 billion and total debt of $5.2 billion at the end of November. The number of its creditors is between 25,000 and 50,000. Bank of New York Mellon is the largest unsecured creditor with a claim of $1.18 billion.
"While the company has commenced a liquidation sale, Bed Bath & Beyond Inc. intends to use the Chapter 11 proceedings to conduct a limited sale and marketing process for some or all of its assets," Bed Bath & Beyond said, adding that it has already filed requests "seeking authority to market Bed Bath & Beyond and buybuy BABY as part of an auction."
"In the event of a successful sale, the company will pivot away from any store closings needed to implement a transaction. The company believes this dual-path process will best maximize value," it said.
Coupons Will No Longer Be Accepted
The retail chain has sent a message to its customers in which it indicates that it will honor its commitments.
"Our stores are open and serving customers. However, we have initiated a process to wind down operations," the company told its customers. "We wanted to make you aware that several of our programs and policies may be changing soon."
"As of today we expect to process returns and exchanges in accordance with our usual policies until May 24, 2023, for items purchased prior to April 23, 2023. We expect Gift Cards, Gift Certificates, and Loyalty Certificates will be accepted through May 8, 2023," but "we will no longer accept coupons or Welcome Rewards+ discounts beginning April 26, 2023."
It concluded that "we expect all in-stock orders placed online both prior and after our bankruptcy filing to be fulfilled at this time."
Bed Bath & Beyond made its name by offering ubiquitous coupons called Big Blue that were mailed to American consumers by the millions to buy sheets, rugs and other household items.
As TheStreet's Ellen Chang wrote last February, consumers stashed the coupons, outlined in the retailer's trademark blue color in their cars, purses, bags and even junk drawers so they could snag a 20% discount some day. Management lured in shoppers with the coupons which arrived frequently, often before people could use them to buy a set of Moscow mule mugs or a housewarming gift.
The coupons were still around as of mid-April. But even the coupons were not enough to attract its once loyal shoppers who sought to buy the latest trendy gadgets or kitchen utensils.
In recent years, the retailer has stagnated in shopping centers, as competitors, like Target, ramped up their offerings of inexpensive bedding, pillows and cheap glassware, making it easy for shoppers who had originally planned to buy shampoo and laundry detergent to add a few extra items to their carts.
As shopping online became more common, Bed Bath & Beyond was often abandoned by customers. The ones who did shop there complained about the lack of inventory while others sought answers to questions about stemware or vacuum cleaners, only to be left without any help from employees.
The company's debt increased over the years to the point that it began defaulting on its interest payments. Changing CEOs also did not appear to help - last October the company hired Sue Gove to run the ailing company after Mark Tritton stepped down.
