This week Bed Bath & Beyond laid out to investors its turnaround strategy, however experts say it is likely too little too late, and will not save the company.
Macco CEO and restructuring expert Drew McManigle said in an interview, “I’ve been in this business for 35 years in restructuring and turnarounds, and…unfortunately, it’s just a little bit too little too late. They should have started this process last year if they’d been paying attention to the post-pandemic numbers.”
He added, “I’m not going to be one bit surprised if the Chapter 11 petitions have already been drafted or are just waiting for a signature.”
Bed Bath & Beyond’s turnaround strategy entails raising more cash, closing roughly 150 stores, cutting 20% of supply chain and corporate staff, streamlining their organizational structure, and removing the Chief Operating Officer and Chief Store Officer roles. The company noted that it has liquidity of about $1 billion, including $500 million in additional financing, including a $375 million loan from Sixth Street Partners.
Since the plan was revealed Wednesday, Bed Bath & Beyond stock has dropped 28% as of the market close on Friday.
McManigle warned the plan did not go nearly far enough, and he believes a Chapter 11 bankruptcy is a “fait accompli.”
McManigle added, “I’m also not convinced that this $500 million in financing is going to be enough cash. And I’m not convinced that it’s going to make any difference in the long term whether they file a Chapter 11 proceeding or not because quite frankly that’s the only way they’re going to be able to successfully restructure $1.3 billion in debt and get out from underneath a lot of real estate.”
Bed Bath & Beyond had 955 stores, among them 135 buybuy BABY stores and 51 Harmon or Face Value stores as of its fiscal first quarter. Bed Bath & Beyond noted that real estate is a focal point in the retailer’s turnaround plan, and it will continue to, “evaluate its portfolio and leases, in addition to staffing, to ensure alignment with customer demand and go-forward strategy.”
S&P Global Ratings still gives Bed Bath & Beyond a CCC credit rating and a negative outlook after reviewing the turnaround plan, saying its, “turn-around prospects remain very weak based on its ongoing cash burn, unfavorable macroeconomic conditions, and our view that its vendor relationships could be strained.”
It notes its rating is based upon, “the risk the company could default on its debt or pursue a restructuring in the coming 12 months.”
