September 28, 2022

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Bed Bath & Beyond to cut jobs and close stores in an effort to reverse losses

Bed Bath & Beyond to cut jobs and close stores in an effort to reverse losses

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Aug 31 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) On Wednesday, it said it has signed deals with more than $500 million in new funding and that it will close 150 stores, cut jobs and overhaul its business strategy in an effort to turn around its losing business.

However, investors remain concerned that the retailer’s plan, announced in a strategic update, will do little to improve Bed Bath & Beyond’s business as shares are down 25%. The retailer also announced a plan to raise funds by issuing new shares.

The big box chain — once known as a “category killer” in home and bathroom supplies — has seen its fortunes falter after trying to sell more of its own brand, or private label, merchandise. The COVID-19 pandemic, supply chain crisis and consumer backsliding due to severely high inflation have also affected chain sales.

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Bed Bath & Beyond forecast a larger-than-expected 26% drop in same-store sales for the second quarter and said it would keep the Buybuy Baby business it had put up for sale.

GameStop Corp. has encouraged buybuy Baby selling efforts (GME.N) Chairman Ryan Cohen, the company’s largest investor until this month when he sold his 9.8% stake, sent shares down.

Known for providing many shoppers with 20% off coupons, Bed Bath & Beyond has revamped its products in recent years to focus on private-brand products including Our Table-branded cookware. Read more

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The chain is now abandoning that strategy, eliminating three of its own brands, and reprioritizing national brands with brands including Calphalon, Ugg, Dyson and Cuisinart that support that strategy, executives said on a conference call.

Executives said Bed Bath & Beyond is laying off 20% of its corporate and supply chain workforce, removing its chief operating officer and chief store officer positions. The company has about 32,000 employees.

Senior officers tried to reassure analysts that sellers were still supporting the company, a key indicator of its long-term financial prospects. Suppliers will ask for more money up front or stop shipping goods if they think retailers can no longer pay them.

Signs at the Bed Bath & Beyond store in Manhattan, New York City, US, June 29, 2022. REUTERS/Andrew Kelly/File Photo

“Because we have been able to burn through our liquidity, we have seen changes in the vendors we manage,” said Chief Financial Officer Gustavo Arnal, adding that the company is managing the situation “one by one.”

First-quarter sales fell 25% and lost $358 million, leading to the dismissal of CEO Mark Triton in June. The company has hired Sue Goff, an independent board director, to replace him on a temporary basis.

On Wednesday, Gove said the retailer “continues to see significant positive momentum” and intends to build its “deep legacy as a retailer.”

“While there is a lot of work ahead, our roadmap is clear and we are confident that the significant changes we announced today will have a positive impact on our performance,” she said on a conference call.

The company also said it has expanded the scope of its existing loan and received a new $375 million “first in and last” loan, and will launch a stock offering of up to 12 million shares.

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Arnal said 50 to 60 stores will be closed in the “first wave” heading into the balance for Bed Bath & Beyond’s fiscal year, which ends in February. The company has about 900 stores.

“They have run out of cash and desperately need to raise money just to keep the business going,” said Jim Dixon, stock sales trader at Mirabud.

To improve its finances, the retailer said it will cut selling, general and administrative expenses by $250 million this year compared to last year and rein in capital spending.

The company also estimates that comparable store sales will fall 20% this year as it works through its transformation.

“We are generally satisfied that the measures announced today … will relieve pressure on the company, allowing it to continue trading,” said Neil Saunders, Managing Director of GlobalData.

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Additional reporting by Uday Sampath, Deborah Sophia and Bansari Kamdar in Bengaluru; Additional reporting by Siddharth Caval, Jessica Dianapoli and Ariana McLemore in New York. Editing by Aaron Coeur and Jonathan Otis

Our criteria: Thomson Reuters Trust Principles.