Bed Bath & Beyond Files for Bankruptcy
Years of losses and a failed turnaround plan left the retailer struggling to stock stores. The company expects all its retail locations to eventually close.
www.wsj.com
By Suzanne Kapner and Soma Biswas
Updated April 23, 2023 5:15 pm ET
Bed Bath & Beyond Inc. filed for bankruptcy protection to wind down its business after years of losses and failed turnaround plans left the once-powerful retailer short of cash.
The company had warned of a potential bankruptcy for months. It needed a $375 million loan to get through the holidays. It struck an unusual $1 billion financing deal with a hedge fund in February to put off a bankruptcy filing, then scrapped the deal and tried this month to raise $300 million from other investors.
None of the moves were enough. Nor were efforts to stem losses by closing hundreds of stores. Sales evaporated and its stock price tumbled well below $1 in recent weeks, as the rescue efforts dimmed.
The retailer filed for chapter 11 bankruptcy Sunday in the U.S. Bankruptcy Court in Newark, N.J., and said it expects to close all of its 360 Bed Bath & Beyond and 120 Buybuy Baby retail locations eventually. Top lender Sixth Street Partners has put up $240 million in financing to keep Bed Bath & Beyond operating through the liquidation process, the company said.
Bankruptcy gives Bed Bath & Beyond the breathing room to conduct going-out-of-business sales at its physical stores and solicit interest from potential buyers for its remaining assets, such as its branding. Individual investors who continued to back Bed Bath & Beyond during its final months, when it was flooding the market with shares, will likely be wiped out in chapter 11, which prioritizes the repayment of debt over shareholder recoveries.
As Bed Bath & Beyond’s situation worsened, suppliers stopped shipping goods to the retailer.
If a bidder emerges for the business in bankruptcy, Bed Bath & Beyond said it would pivot away from its liquidation plans to pursue a sale.
Holly Etlin, the company’s chief restructuring officer and chief financial officer, struck an optimistic note about the prospects of finding a buyer. “Bed Bath & Beyond has pulled off long shot transactions several times over the past six months so nobody should think Bed Bath & Beyond should not be able to do so again,” Ms. Etlin said in a court filing Sunday.
Once a pop-cultural phenomenon, Bed Bath & Beyond has long been losing shoppers to rivals and struggling to stock its stores. Replacing KitchenAid mixers and other name brands with private-label goods further alienated vendors and customers.
Bed Bath & Beyond joins a growing list of once-ubiquitous retail chains seeking court protection. Some like J.C. Penney Co. continue to operate hundreds of stores; others like Sears and Toys ‘R’ Us closed most of their locations; while Circuit City and Linens ‘n Things disappeared altogether.
The country’s largest wedding-dress retailer, David’s Bridal LLC, recently filed for bankruptcy and said it would shut all of its stores if it doesn’t quickly find a buyer. It was the chain’s second bankruptcy filing in less than five years.
Bed Bath & Beyond’s plan to close all stores is another potential blow to retail landlords. They are already contending with higher interest rates that have pushed up their borrowing costs.
However, property owners have some reason for hope, as big-box retailers such as bookseller Barnes & Noble and discount-clothing store Burlington have shown signs of expanding again after years of shrinking their real-estate footprints.
Bed Bath & Beyond was co-founded by Warren Eisenberg and Leonard Feinstein, who together opened two Bed ‘n Bath stores in 1971 in New York City suburbs. It grew into a category killer—operating hundreds of big stores that sold everything from bedding to air purifiers. It changed its name to Bed Bath & Beyond in 1987.
The founders spent what little money they had on merchandise, not on making the stores look pretty. To cover the industrial fixtures, they piled merchandise to the ceiling. The clutter that came to embody the chain ensured that shoppers wouldn’t leave empty-handed.
Bed Bath & Beyond co-founders Warren Eisenberg, in pink, and Leonard Feinstein.
“If you came to the store to buy a mattress pad, there was no way that you were going to walk out with only a mattress pad,” Mr. Eisenberg, who is 92 years old, said in a January interview.
The company went public in 1992 and grew to more than 1,550 stores. Along the way it acquired the Buybuy Baby chain started by the sons of Mr. Feinstein. It also bought Christmas Tree Shops, the Harmon drugstore chain and One Kings Lane, an online seller of home décor.
Bed Bath & Beyond didn’t have an unprofitable year as a public company until 2019—when it reported its first annual sales decline. By then, the rise of Amazon.com Inc. and other online retailers had started to eat into the business. “We missed the boat on the internet,” Mr. Eisenberg said.
A group of activist investors forced the co-founders, who had relinquished their executive duties in 2003 but remained co-chairmen, off the board in 2019. The reconstituted board hired former Target Corp. executive Mark Tritton as chief executive.
Mr. Tritton moved quickly to put his stamp on the company. He sold many of the company’s noncore businesses, including Christmas Tree Shops. Then, in January 2020, he signed a deal to sell roughly half the company’s real estate to a private-equity firm and lease back the space.
With the world in lockdown due to the Covid-19 pandemic, Mr. Tritton pushed through what the company called the biggest change to its assortment in a generation. It replaced name brands such as KitchenAid mixers, All-Clad cookware and OXO spatulas with private-label goods manufactured just for Bed Bath & Beyond.
Bed Bath & Beyond went public in 1992 and expanded to more than 1,550 stores.
That plan failed for several reasons, according to former employees and analysts. Mr. Tritton made the switch at a time when supply chains had been upended by the pandemic. Factories had temporarily closed and shipping delays were proliferating, along with rising costs, making it difficult for retailers to keep goods flowing to their stores in a timely manner.
The company also rolled out too many private brands too quickly, before it had the infrastructure to support them, the former employees said. It planned to launch eight new brands in 2021 alone.
At first, the results of Mr. Tritton’s strategy looked promising. Bed Bath & Beyond’s sales rose 49% in the spring quarter of 2021, compared with a year earlier when stores were closed for Covid lockdowns. Mr. Tritton presented results to the board showing that some of the early private-label launches—such as the Simply Essential line of bed, bath, kitchen, dining and storage items—were well-received by shoppers, according to people with knowledge of the company.
Some of that buying was due to consumers stocking up while sheltering from the pandemic. As that demand ebbed, the gains quickly evaporated. By August 2021, sales were falling, and they continued to drop, as losses piled up.
Mr. Tritton had planned a similar overhaul of the Buybuy Baby chain by replacing Gerber and other children’s brands with private-label goods. But he was pushed out in June 2022, before he could make many of those changes. Sue Gove, a veteran retailing executive and Bed Bath & Beyond director, was named interim CEO.
Meanwhile, Bed Bath & Beyond’s stock went on a wild ride after Ryan Cohen, the billionaire founder of pet retailer Chewy Inc., took a big stake in the company and agitated for changes, including the sale of Buybuy Baby.
The board considered strategic alternatives for the baby chain, but decided against selling because separating it would have been time-consuming and costly, and they needed to nail down a new strategy before marketing it to potential bidders, people familiar with the situation said.
Bed Bath & Beyond said in early January that it might not have enough cash to continue operating.
Bed Bath & Beyond was running low on cash and had fallen behind on payments to suppliers. The shares plunged in August after Mr. Cohen unloaded his entire stake.
The company announced plans to close 150 stores and reduce staff. Over the Labor Day weekend, its finance chief died by suicide days after helping to secure new financing.
In October, Ms. Gove, who had been made permanent CEO, hosted a summit to reassure suppliers and plead for their continued support, as she tried to woo back big-name national brands.
By then, however, many suppliers had found other places to sell their goods. Bed Bath & Beyond struggled to keep its stores stocked during the recent holiday shopping season.
The retailer warned in early January that it might not have enough cash to continue operating its business after holiday sales came up short. Eating into its cash reserves was $1.02 billion it spent on buying back its own stock from 2020 to 2022, according to FactSet.
By January the company was overdrawn by $200 million on its bank credit line, according to the court filing by Ms. Etlin, the company’s chief restructuring officer and chief financial officer.
In February, the company struck a deal with hedge fund Hudson Bay Capital Management to raise $225 million upfront and more in installments over 10 months while the retailer closed stores and cut costs. The company ended the deal in April as its share price slumped.
Instead, Bed Bath & Beyond said it would try to raise $300 million by April 26 from selling new shares, but the dwindling share price made it increasingly difficult. The stock closed at 29 cents on Friday.
Customers said they are saddened by the company’s demise but have already found other places to shop.
“They used to be my go-to place for bedding, appliances, anything I needed for the house,” said Sheryl Bilus, a 68-year-old retired bank manager who lives in Canton, Ga. “Now, I buy all of that on Amazon.”
Write to Suzanne Kapner at suzanne.kapner@wsj.com and Soma Biswas at soma.biswas@wsj.com
I forgot that the CFO killed himself. Hardcore.
