Daily Management Review

Bed Bath & Beyond Will Lay Off Workers And Close Stores In An Effort To Recoup Losses


Bed Bath & Beyond Will Lay Off Workers And Close Stores In An Effort To Recoup Losses
Bed Bath & Beyond Inc announced on Wednesday that it had secured more than $500 million in new financing and that it would close 150 stores, lay off employees, and revamp its merchandising strategy in an effort to turn around its money-losing business.
However, investors are concerned that the retailer's plan, announced in a strategic update, will do little to improve Bed Bath & Beyond's business, as shares dropped 25 per cent. In addition, the retailer announced a plan to raise funds by issuing new shares.
The big-box retailer, once regarded as a "category killer" in home and bath goods, has seen its fortunes dwindle following an attempt to sell more of its own brand, or private label, goods.
The COVID-19 pandemic, supply chain constraints, and consumer reluctance to shop due to sky-high inflation all impacted the chain's sales.
Bed Bath & Beyond predicted a 26% drop in same-store sales for the second quarter, but said it would keep its buybuy Baby business, which it had put up for sale.
The efforts to sell buybuy Baby were encouraged by GameStop Corp (GME.N) Chairman Ryan Cohen, the company's largest investor until this month, when he sold his 9.8% stake, sending shares plummeting.
Bed Bath & Beyond, once known for providing many customers with 20%-off coupons, has revamped its merchandise in recent years to focus on private-label products such as its Our Table brand cookware. 
According to executives on a conference call, the chain is abandoning that strategy, eliminating three of its private label brands and reprioritizing national brands, which include Calphalon, Ugg, Dyson, and Cuisinart.
According to executives, Bed Bath & Beyond is laying off about 20% of its corporate and supply chain workforce, as well as eliminating the positions of chief operating officer and chief stores officer. The company employs approximately 32,000 people.
Top executives attempted to reassure analysts that vendors continued to support the company, a key indicator of its long-term financial prospects. If suppliers believe retailers will not pay them, they will request more money up front or stop shipping goods.
"As we have managed through our cash burn, we have seen changes in vendors we manage," said Chief Financial Officer Gustavo Arnal, adding that the company is managing the situation "one by one."
Sales fell 25 per cent in the first quarter, and the company lost $358 million, prompting the resignation of CEO Mark Tritton in June. Sue Gove, an independent board director, was hired as an interim replacement.
Gove said on Wednesday that the retailer was "continuing to see significant positive momentum" and that it planned to build on its "deep heritage as a retailer."
"While there is much work ahead, our road map is clear and we're confident that the significant changes we've announced today will have a positive impact on our performance'" she said on a conference call.
The retailer also announced the expansion of an existing loan and the receipt of a new $375 million "first-in-last-out" loan, as well as the launch of a stock offering of up to 12 million shares.
Arnal stated that 50 to 60 stores will be closed in a "first wave" before the end of Bed Bath & Beyond's fiscal year in February. The company operates approximately 900 stores.
"They are running out of cash and desperately need to raise cash just to keep the business going," said Jim Dixon, equity sales trader at Mirabaud.