Bed Bath & Beyond to cut jobs, close stores in effort to replace losses

Aug 31 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) It said on Wednesday it had signed more than $500 million in new financing deals, that it would close 150 stores, cut jobs and overhaul its business strategy in an effort to turn around its money-losing business.

However, investors said the retailer’s plan, announced in a strategic update, did little to improve Bed Bath & Beyond’s business as shares fell as much as 26.5%. The retailer also announced plans to raise cash by issuing new shares.

The big-box chain โ€” once considered a “category killer” in home and bath products โ€” saw its fortunes falter after trying to sell its own brand, or private label, products. The chain’s sales have been affected by the COVID-19 pandemic, a supply chain crisis and a consumer pullback in shopping due to sky-high inflation.

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Bed Bath & Beyond forecast a 26% decline in same-store sales in the second quarter than expected and said it would retain its Biby Baby business, which had been put up for sale.

Efforts to sell Pipe Baby were promoted by GameStop Corporation (GME.N) Chairman Ryan Cohen, who was the company’s largest investor until this month, sold his 9.8% stake, sending the stock tumbling.

Cohen’s exit followed a 300% rise in the value of its shares amid a speculative rally in meme stocks, a popular reference to stocks traded by investors based mostly on hype on social media rather than their economic fundamentals. read more

In its current predicament, VandaTrack, which tracks retail buying of the stock, expects retail investor interest in Bed, Bath & Beyond to fade, but found that some investors aren’t abandoning the stock entirely.

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“Typically, meme stocks need exponential growth in earnings to rally in a bear market environment,” the firm said in a research note published Wednesday.

A lot of work ahead

Once known for offering 20% โ€‹โ€‹off coupons to many shoppers, Bed Bath & Beyond revamped its merchandise in recent years to focus on private-label products, including its Our Table brand of cookware. read more

The chain is now abandoning that strategy, eliminating three of its private-label brands, and re-prioritizing national brands with labels including Calphalon, Ugg, Dyson and Cuisinart underpinning that strategy, executives said in a conference call.

Bed Bath & Beyond will cut about 20% of its corporate and supply chain workforce and eliminate the positions of its chief operating officer and chief store officer, executives said. The company has around 32,000 employees.

Spotted at Bed Bath & Beyond store in Manhattan, New York City, USA on June 29, 2022. REUTERS/Andrew Kelly/File Photo

Top executives sought to reassure analysts that vendors still support the company, a key sign of its long-term financial prospects. If they believe retailers cannot pay them, suppliers will ask for more money up front or stop shipping goods.

“As we managed to burn our cash, we saw changes in the vendors we manage,” said Chief Financial Officer Gustavo Arnal, adding that the company is managing the situation “on a case-by-case basis.”

First-quarter sales fell 25% and it lost $358 million, and it fired CEO Mark Tritton in June. The company replaced him on an interim basis with an independent board director, Sue Ko.

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

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“There is a lot of work ahead, our roadmap is clear and we believe the significant changes we announced today will have a positive impact on our performance,” he said on a conference call.

The retailer said it expanded existing debt and secured a new $375 million “first-to-last” loan and will issue up to 12 million more shares of stock.

Arnal said 50 to 60 stores will close in the “first wave” of Bed Bath & Beyond’s fiscal year ending in February. The company has around 900 stores.

“They ran out of money and had to raise money to keep the business going,” said Jim Dixon, an equity trader at Mirabaud.

To improve its finances, the retailer said it will cut selling, general and administrative expenses by $250 million this year from last year and curb capital expenditures.

It estimates comparable-store sales will fall 20% this year as the company works through its transition.

“We are broadly satisfied that the measures announced today… will ease the pressure on the company and allow it to continue trading,” said Neil Saunders, managing director of Global Data.

Shares of the retailer closed the day down 19.8% at $9.71.

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Reporting by Uday Sampath and Deborah Sophia and Bansari Kamdar in Bangalore; Additional reporting by Siddharth Kevale, Jessica DiNapoli and Ariana McLemore in New York; Editing by Arun Koyur and Jonathan Otis

Our Standards: Thomson Reuters Trust Principles.

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