What's ahead for Bed Bath & Beyond in wake of bankruptcy warning

When Bed Bath & Beyond leaders talk to investors Tuesday morning, they won't simply study income and net results. They volition person to code a stark reality: The cash-strapped location goods retailer is moving retired of time.

On Thursday, Bed Bath warned it whitethorn person to record for bankruptcy, saying that it could soon beryllium incapable to screen costs arsenic income lag and store postulation dwindles. It besides said it's struggling to support items successful stock, arsenic it runs debased connected currency and works to remedy strained relationships with suppliers.

The nationwide chain, known for its 20% coupons and sky-high piles of towels and housewares, is progressively astatine hazard of joining the database of retailers that person shuttered stores and faded away. Think, Sears. Circuit City. RadioShack. Pier 1. Linens 'n Things.

What's more, the attempted turnaround comes astatine the aforesaid clip that ostentation weighs connected consumers' wallets and arsenic the lodging marketplace gets deed by higher involvement rates. Plus, aft spending the earlier years of the pandemic astatine home, much radical are choosing to walk wealth connected eating retired oregon booking trips alternatively than buying cookware, a duvet oregon propulsion pillows.

"When you person a displacement successful however consumers are allocating their spending, and a recession looming perchance connected the horizon, it makes it overmuch much of an uphill battle," said Justin Kleber, elder probe expert astatine Baird Equity Research.

The company's banal show reflects its pugnacious way forward, too. Shares of the institution touched a 52-week debased connected Friday. As of aboriginal Monday, shares were trading astir $1.74 for a marketplace worth of little than $151 million.

Bed Bath laid retired its latest turnaround plan successful August. The program called for drastic outgo cuts successful the mode of closing astir 150 of its namesake stores and reducing its caput number by astir 20% crossed its firm and proviso concatenation workforce.

Those efforts person brought its operating costs down, arsenic it tries to thrust up sales: For the 3rd quarter, Bed Bath expects operating expenses to beryllium astir $583.6 million, compared with about $698 million in the year-ago period, it said Thursday.

The company's turnaround strategy besides progressive phasing retired immoderate of its backstage labels and bringing backmost much well-recognized nationalist brands. It pledged successful August to enactment with those nationalist brands to make exclusive items and to adhd items from direct-to-consumer brands — merchandise aimed astatine mounting it isolated and giving shoppers a crushed to travel backmost to its stores.

Come Tuesday, investors volition privation to perceive if the institution has improved its inventory levels, if they managed to unafraid immoderate exclusive items for the vacation play and however consenting vendors person been to enactment with the retailer. If Bed Bath has made important inroads successful improving inventory, it could connection a glimmer of anticipation for the quarters ahead.

"Being the archetypal to bring caller brands and products to our lawsuit has ever been 1 of our roles arsenic a retailer," Executive Vice President Mara Sirhal told investors during an Aug. 31 concern update. "In the location market, there're galore D2C brands which bring their ain compelling marque selling and followers who cognize and privation them but aren't wide disposable to shop."

Emerging direct-to-consumer brands have an inducement to spouse with brick-and-mortar shops similar Bed Bath and Target, arsenic they connection a mode to scope much customers and a reprieve from the e-commerce cooldown, steep selling costs and user wont shifts that person chopped into profitability since the Covid pandemic began to wane. 

But brands and vendors person been hesitant to widen recognition to Bed Bath arsenic its mounting indebtedness formed uncertainty implicit its quality to wage backmost bills. 

And income trends wide person remained weak.

The institution said Thursday it expects nett income for the 3rd quarter, which ended Nov. 26, to beryllium astir $1.26 cardinal — a astir 33% driblet from $1.88 billion it reported for the year-ago period. Bed Bath anticipates a nett nonaccomplishment of astir $385.8 million for the quarter, an astir 40% leap successful losses twelvemonth implicit year. Those quarterly losses see an astir $100 cardinal impairment charge, which was not specified.

CEO Sue Gove urged patience connected Thursday, saying the turnaround volition instrumentality time. She took the helm aft former CEO Mark Tritton was pushed out successful June.

"Transforming an enactment of our size and standard requires time, and we expect that each coming 4th volition physique connected our progress," she said successful a quality release.

Baird's Kleber said investors volition privation to perceive if there's been a alteration successful income trends during the Christmas play — cardinal weeks that would beryllium reflected successful fourth-quarter results, but could beryllium previewed sooner.

Before Bed Bath tin code moving merchandise disconnected shelves, though, it needs to tackle an adjacent much cardinal problem: having capable merchandise to capable them.

Gove said debased inventory was partially to blasted for the company's anticipated third-quarter losses.

The institution is utilizing dollars it earned during the vacation play to bulk up the shelves with assistance from its cardinal vendors, Gove said. As in-stock levels person improved, truthful person income trends, she said.

But it's not wide if that volition beryllium enough.

"At the extremity of the day, each of the yabba dabba doo astir their recently minted strategy that they were touting implicit the past six months. It's each conscionable a batch of talk," said Mark Cohen, a prof and manager of retail studies astatine Columbia Business School.

Cohen said helium sees the going-concern informing arsenic the "kiss of death" for Bed Bath, solidifying bankruptcy arsenic the retailer's lone remaining enactment — beyond a savior swooping successful with an infusion of currency oregon to bargain a involvement of the company.

"Without a defining lawsuit of that sort, this institution is toast," said Cohen, the erstwhile CEO of Sears Canada.