Bed Bath & Beyond, a popular home goods retailer that became well-known in the 1990s as a go-to destination for couples setting up wedding registries and expecting new babies, has filed for Chapter 11 bankruptcy protection.
The company was unable to secure the funds needed to continue operating, and has begun a liquidation sale.
The retailer’s drop in demand in recent years was due to a failed merchandising strategy that focused on selling more store-branded products. The company attempted to reverse this trend by bringing in more national brands that shoppers recognize, but these efforts were not successful.
Due to a 33% decrease in sales for the quarter ending on November 26, the company suffered a loss of $393 million.
The retailer, headquartered in Union, New Jersey, filed for bankruptcy in a court located in the District of New Jersey, and disclosed its projected assets and liabilities to be between $1 billion and $10 billion.
The company secured about $240 million in financing from Sixth Street Specialty Lending Inc, which it intends to utilize for a selective process of marketing and selling some or all of its assets while undergoing Chapter 11 proceedings.
The retailer has initiated a liquidation sale, but it has confirmed that it will keep its 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites operational to serve customers while it starts the process of shutting down its other retail locations. The company hopes to use the Chapter 11 proceedings to restructure its business and emerge from bankruptcy stronger and more competitive.
Bed Bath & Beyond’s Bankruptcy Filing
It is unfortunate that Bed Bath & Beyond, which was once a popular retail destination, has filed for bankruptcy protection. The company’s inability to secure funds and the drop in demand for its store-branded products led to its decision to file for bankruptcy. This decision was made after attempts to bring in more national brands failed to boost sales.
The company has received financing during the Chapter 11 proceedings and will use the funds to conduct a limited sale and marketing process for its assets.
Bed Bath & Beyond has begun a liquidation sale, but its stores and websites will remain operational to serve customers while the company undergoes a business restructuring during the bankruptcy proceedings. The company expressed doubts about its ability to continue operating as a going concern in January, despite announcing new financing, job cuts, and store closures just a few months earlier.
In February, the company planned to raise $1 billion to avoid bankruptcy by selling preferred stock and warrants, but it terminated the deal in late March after raising $360 million. The company announced plans to sell $300 million worth of shares instead, stating that it may have to file for bankruptcy if it couldn’t obtain the required funds.
In February, the Canadian operations of Bed Bath & Beyond, which includes 54 Bed Bath & Beyond stores and 11 buybuy BABY stores, were also at risk of closure, according to a filing on the website of consulting firm Alvarez & Marsal, as the division was insolvent.
The bankruptcy of Bed Bath & Beyond is expected to impact different groups, including shareholders, employees, customers, and creditors. Workers may face potential job cuts due to store closures, but the company has announced that it intends to keep running its 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites.
It is unclear how many of these stores will be sold or closed during the liquidation process. Creditors, such as lenders and suppliers, may also suffer losses during the bankruptcy proceedings, despite the company securing a commitment of around $240 million in debtor-in-possession financing from Sixth Street Specialty Lending Inc to continue its operations. The full amount owed to creditors may not be recovered.
Finally, shareholders may also be affected by the bankruptcy, as the value of the company’s stock is likely to decline. However, the company has not yet announced what will happen to its shares during the proceedings.
