Bed Bath & Beyond announced in a financial update that it might not be able to proceed as a “going concern” after recurring losses and negative cash flow from operations for the nine months ended November 26, 2022, as well as current cash and liquidity projections.
Bed Bath & Beyond added that it continues to pursue actions to improve its cash position and mitigate any potential liquidity shortfall. With bankruptcy relief among the possible measures on the table, the company stated that it would continue considering strategic alternatives including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the business activities and strategic initiatives, selling assets and other strategic transactions. However, it maintained that such actions may not be successful, adding in the update the company “has concluded that there is substantial doubt about (its) ability to continue as a going concern.”
Based on recent business performance, Bed Bath & Beyond concluded that the company needs more time to complete its third-quarter-end close procedures, including the evaluation of its results in conjunction with quarterly long-lived asset impairment testing. As such, the company has filed a notification of late filing with the United States Securities and Exchange Commission with respect to its quarterly report.
Bed Bath & Beyond added that the exchange offer and consent solicitation made on its unsecured senior notes, which expired on January 4, had not satisfied the goals it had set. Although some holders decided to tender their unsecured notes, the number was insufficient to address Bed Bath & Beyond’s objectives so it terminated the exchange offer.
For the fiscal 2022 third quarter ended November 26 of last year, Bed Bath & Beyond expects to report net sales of about $1.26 billion versus $1.88 billion in the year-prior period reflecting lower customer traffic and reduced levels of inventory availability among other factors, the company indicated. It anticipates SG&A Expense to come in at approximately $583.6 million compared to $698 million in the year-ago period, driven by the execution of cost optimization initiatives to right-size the company’s expense structure. Bed Bath & Beyond expects a net loss of approximately $385.8 million for the quarter, including impairment charges of approximately $100 million, versus a net loss of $276.4 million in the year-earlier period.
In the financial update and despite the warnings issued, Sue Gove, Bed Bath & Beyond president and CEO, said management is focused on the company’s way forward.
“We have a clear vision for the future of the company,” she said. “Today’s announcement underscores the importance of having initiated a turnaround at the start of the third quarter and why we strengthened our leadership team to execute each step with precision. Our plan has two anchors: the first enables us to refocus merchandising and inventory, operate more efficiently, and grow our digital and omni-capabilities, and the second focuses on strengthening our financial position. Transforming an organization of our size and scale requires time, and we anticipate that each coming quarter will build on our progress.”
Still, recent developments have weighed on the company’s prospects.
“Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macro-economic challenges,” Gove said. “Reduced credit limits resulted in lower levels of in-stock presentation within the assortments that our customers expect. Consequently, we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors. We have seen trends improve when in-stock levels have increased.”
Gove emphasized that Bed Bath & Beyond is carefully assessing its current condition.
“Strengthening our ability to serve our customers will continue to drive our decision-making,” she said. “We are resetting foundational elements to create a stronger and more nimble infrastructure that aligns closely with customer demand and preference. We continue to manage our financial position amidst a changing landscape and work with expert advisors as we consider all paths and strategic alternatives to accomplish our short- and long-term goals. We look forward to providing an update on these fronts on our formal third-quarter earnings call next week. As always, our employees and partners are our top priorities. Our unwavering engagement with our supplier community will continue as we work together to realize our full potential. We are a team focused on the future, and I am grateful for the dedication and hard work of those who are powering our path forward. We will continue to steer our business dynamically to ensure Bed Bath & Beyond, BuyBuy Baby and Harmon remain destinations of choice for customers well into the future.”