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Aug 31 (Portal) – Bed Bath & Beyond Inc (BBBY.O) announced on Wednesday that it has secured more than $500 million in new financing and is closing 150 stores, cutting jobs and its merchandising strategy to turn around its money-losing business.
But 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 fell 25%. The retailer also announced a plan to raise money by issuing new shares.
The Big Box chain – once seen as a so-called “category killer” for home and bathroom goods – has seen its fortunes falter after trying to sell more of its own brand or private label goods. The COVID-19 pandemic, the supply chain crisis and consumers retreating from shopping due to sky-high inflation also impacted the chain’s sales.
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Bed Bath & Beyond forecast a sharper-than-expected 26% slump in same-store sales for the second quarter and said it would keep the buybuy baby business it had put up for sale.
Efforts to sell Buybuy Baby were encouraged by GameStop Corp (GME.N) chairman Ryan Cohen, who was the company’s largest investor until this month when he sold his 9.8% stake and the stocks crashed.
Bed Bath & Beyond, once known for giving many shoppers 20% off coupons, has revamped its wares in recent years to focus on private label products, including Our Table brand cookware. Continue reading
The chain is now abandoning that strategy, axing three of its own brands and reprioritizing national brands, with labels like Calphalon, Ugg, Dyson and Cuisinart underpinning that strategy, executives said on a conference call.
Executives said Bed Bath & Beyond will be cutting about 20% of its corporate and supply chain workforce and eliminating its chief operating officer and chief stores officer positions. The company employs around 32,000 people.
Top Brass tried to reassure analysts that vendors are still supporting the company, a key indicator of its long-term financial prospects. Suppliers will ask for more money upfront or stop shipping goods if they think retailers can’t pay them more.
Signage is seen at a Bed Bath & Beyond store in Manhattan, New York City, the United States, 29 June 2022. Portal/Andrew Kelly/File Photo
“As we’ve dealt with our cash burn, we’ve seen changes in the vendors we manage,” Chief Financial Officer Gustavo Arnal said, adding that the company is managing the situation “one at a time.”
First-quarter revenue plummeted 25% and the company lost $358 million, leading to the firing of its chief executive officer, Mark Tritton, in June. The company hired Sue Gove, an independent chief executive officer, to temporarily replace him.
On Wednesday, Gove said the retailer “continues to see significant positive momentum” and intends to build on its “deep heritage as a retailer”.
“While there is still much work to be done, 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 retailer also said it has expanded an existing loan and secured a new $375 million first-in-last-out loan and will launch a stock offering of up to 12 million shares.
Arnal said 50 to 60 stores will be closed in a “first wave” heading towards the close of Bed Bath & Beyond’s fiscal year, which ends in February. The company has about 900 branches.
“They are out of money and desperately need to raise money just to keep the business going,” said Jim Dixon, equity sales trader at Mirabaud.
To improve its finances, the retailer announced it will reduce SG&A expenses by $250 million this year from a year ago and rein in capital expenditures.
The company also estimates that comparable store sales will fall 20% this year as it undergoes its transformation.
“We are broadly pleased that the actions announced today…will ease the pressure on the company and allow it to continue trading,” said Neil Saunders, Managing Director of GlobalData.
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Reporting by Uday Sampath and Deborah Sophia and Bansari Kamdar in Bengaluru; Additional reporting from Siddharth Cavale, Jessica DiNapoli and Arriana Mclymore in New York; Edited by Arun Koyyur and Jonathan Oatis
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