Bed Bath & Beyond Inc (fka BBBYQ)

[eastunder]

Bed Bath & Beyond Suppliers Halt Shipments Despite New Financing
https://finance.yahoo.com/news/bed-bath-beyond-suppliers-halt-122459772.html
Jeannette Neumann
Fri, November 4, 2022 at 10:25 AM·5 min read

(Bloomberg) -- Some Bed Bath & Beyond Inc. suppliers say they are restricting or halting shipments even after the company secured new financing, a sign of the challenges the troubled retailer faces to receive new merchandise and reverse more than a year of plummeting sales.

Bed Bath & Beyond used a portion of the $500 million in additional financing it got at the end of August to catch up on overdue payments to suppliers. But some of those suppliers say they remain concerned about the retailer’s survival and have cut off or cut back on merchandise they ship to the company. That further complicates Bed Bath & Beyond’s turnaround strategy, which hinges on securing a steady supply of products from national brands.

Take Dbest Products Inc., which has been selling its rolling carts to Bed Bath & Beyond for more than a decade. In early September, the company for the first time asked Bed Bath & Beyond to pay upfront for its products. “We requested to alter our payment terms to payment in advance and they said no — politely,” Dbest Products Chief Executive Officer Richard Elden said. He says he previously sold around “six figures” worth of wholesale products to Bed Bath & Beyond annually.

“We’d rather keep our product for customers that we expect will pay us with no issues and no problems,” Elden said.

Similarly, Lauren Greenwood, president of kitchen storage and organization company YouCopia, said she recently stopped shipping her merchandise to Bed Bath & Beyond after more than 10 years. “There is considerable financial risk,” Greenwood said. “We’re wishing them well. We’ll see if that means getting back into stores — or waiting from the sidelines to see if they can pull it off.”

Letter of Credit

The head of a company that had supplied $15 million to $20 million of wholesale merchandise to Bed Bath & Beyond annually in recent years said he had stopped shipping his products to the retailer in August. He asked not to be named to avoid jeopardizing his relationship with the company. The supplier said Bed Bath & Beyond hasn’t agreed to provide him with an additional financial guarantee he requested, called a letter of credit.

An executive at another supplier, who also requested anonymity, said his company is shipping the private-label merchandise it had already made on behalf of Bed Bath & Beyond. That merchandise represents only about a fifth of what it used to ship before the pandemic. The person said that a virtual meeting the company hosted last week for suppliers was disappointing since Bed Bath & Beyond executives reiterated much of what they had already said publicly.

Some smaller suppliers haven’t been paid since around June, according to a person familiar with the matter, although it isn’t clear how many vendors are awaiting payments.

In a statement, a Bed Bath & Beyond spokeswoman said the company is “working expeditiously and broadly with our suppliers to ensure a continuous flow of the products our customers want — including optimizing our supply-chain infrastructure — while generating liquidity to provide the financial flexibility and assurance for the company, our partners and our stakeholders.”

It’s an inopportune time for a pullback among suppliers, with Bed Bath & Beyond in the midst of a major strategic shift. It’s discontinuing some of its private-label lines that haven’t been selling well and trying to bolster its offering of national brands such as Oxo, Ninja and SodaStream. The Union, New Jersey-based company is also closing stores and has laid off about 20% of its workforce.

“The view from the shop floor is that the company still doesn’t have a firm grip on its inventory or supply chains, and that creates a less-than-compelling customer experience,” said GlobalData analyst Neil Saunders, who visited some stores in recent weeks.

Cautious Approach

Some major suppliers have continued to work with the retailer, including Helen of Troy Ltd., which owns brands including Oxo and Hydro Flask. “Regarding Oxo, we are working closely with them at the highest levels,” Helen of Troy Chief Executive Officer Julien Mininberg told analysts during an earnings call in early October. Still, the company is taking a cautious approach to the retailer. “Over the past few years, we have decreased our concentration of business with Bed Bath & Beyond and are continuing to manage our credit exposure,” Mininberg said.

Bed Bath & Beyond has reported double-digit declines in revenue for the past five quarters. While its liquidity problems eased somewhat after the financing deal, it still burned through $321 million in cash in the quarter ended Aug. 27. The company started a bond swap on Oct. 18 to trim its debt load. That prompted S&P Global Ratings to downgrade the retailer’s debt further into junk territory. The credit-rating firm said the exchange was “tantamount to a default” because bondholders will receive less than they were originally pledged. Bed Bath & Beyond is also issuing shares.

Suppliers have been eager to work with Bed Bath & Beyond in recent years because of its size and national reach. But they’ve also found the retailer difficult at times, in part because of its antiquated systems, according to suppliers. As recently as two years ago, the company still paid suppliers via paper checks. “It’s a small sign that they hadn’t taken the time to invest in the systems to get up to speed,” YouCopia’s Greenwood said.

Some suppliers also say Bed Bath & Beyond was slower to pay than its peers, a trend that worsened earlier this year as the company’s sales plunged.Bed Bath & Beyond’s use of its Buybuy Baby brand as collateral to secure the financing in August leaves one supplier concerned that, in the event of a bankruptcy, there would be fewer assets available to suppliers and other unsecured creditors since the lenders would probably seize the baby business. A spokeswoman didn’t respond to requests for comment.

Bed Bath & Beyond shares fell as much as 3.9% in New York trading Friday. The stock is down 72% this year through Thursday, compared with 22% for the S&P 500 Index.

--With assistance from Eliza Ronalds-Hannon.

(Updates with details on unpaid suppliers in the eighth paragraph and a supplier's concern about unsecured creditors in the penultimate paragraph.)