Bed Bath & Beyond Inc. said it’s close to securing financing and is putting in place a new business strategy to reduce costs as the troubled retailer tries to convince investors, vendors and customers that it has a credible survival plan.
The home-goods retailer said it has received commitments for a new $375 million “first-in-last-out” facility with Sixth Street Partners and an expanded $1.13 billion asset-backed revolving credit facility, which is being led by JPMorgan Chase. The company said the loan deal hasn’t closed yet but is expected to soon.
To boost falling sales and cut costs, Bed Bath & Beyond said Wednesday that it is cutting 20% of jobs across its corporate and supply-chain operations and closing about 150 lower-producing stores. The company said the efforts would reduce costs by about $250 million this fiscal year. Bed Bath & Beyond also said it would trim its capital expenditures.
“We are working swiftly and diligently to strengthen our liquidity and secure our path for the future,” interim Chief Executive Officer Sue Gove said in a statement.
Bed Bath & Beyond said it was preparing to potentially issue up to 12 million shares to help repay debt, without providing details on the timing. The shares had plunged earlier Wednesday after the company alerted the market to the possibility of a share offering. The stock was down 26% at 8:25 a.m. in New York trading.
Sales warning
Preliminary sales in the quarter ended Aug. 27 were $1.45 billion. That’s below the average analyst estimate of $1.50 billion.
The retailer is trying to counter growing concerns about its financial outlook. Bed Bath & Beyond faces a shrinking cash pile and is falling behind on payments to vendors, prompting some suppliers to halt or restrict shipments. While the Union, New Jersey-based company became beloved by small-time investors, its equity rally quickly fizzled after activist shareholder Ryan Cohen disclosed this month that he was selling his stake in the company.
Bed Bath & Beyond said on Wednesday that it has decided to keep its Buybuy Baby brand despite calls for it to be sold. The division has fared better than the company’s namesake brand. While comparable sales at the Bed Beth & Beyond brand plunged by 27% in the quarter that ended in May, comparable sales at Buybuy Baby fell by just mid-single digits.
Read more: Bed Bath & Beyond’s grasp for cash puts baby brand on the line
The highest inflation in four decades and incessant supply-chain problems have dimmed the outlook for many U.S. retail companies. But Bed Bath & Beyond’s woes are the culmination of a series of missteps by executives in recent years. Those problems are now exacerbated by slowing consumer demand for home goods.
Former CEO Mark Tritton boosted the company’s private-label products while trimming its offering of well-known brand names and also cut back on coupons, among other changes. But his attempt at a turnaround was unsuccessful. After 2 1/2 years at the helm, he exited abruptly earlier this summer, leaving what “can only be described as a hot mess,” GlobalData analyst Neil Saunders wrote in a research note at the time. Gove, a board member, stepped in to temporarily run the business.
Customers missed the household names that had drawn them to Bed Bath & Beyond in the first place and the availability of the company’s private-label products was inconsistent during the pandemic. Those items typically take longer to arrive in stores since they are often sourced in Asia. As a result, the company was unable to take advantage of surging demand when shoppers were stuck in their homes. Now, it has too much inventory, which executives have said they aim to sell down during the holiday season.
