Bed Bath & Beyond bankruptcy: BBBY stock nears 25-year lows as retailer loses another executive
By Jenny McCall
11:01 (UTC), 4 November 2022
Bed Bath and Beyond stores are losing customers. Could bankruptcy hit the popular meme stock?
Bed Bath & Beyond (BBBY) stock is tanking right now and failing to get above – or beyond the risk of bankruptcy, which is hanging over the company’s head right now. Its stock price has plummeted by 72% this year and since June, when executives either fled or got the chop, BBBY’s share price has dropped more than 50%.
The popular meme stock has been plagued by fleeing board managers and a senior manager dying by suicide.
On 2 November, it was announced that BBBY board's chief customer officer, Rafeh Masood, was the latest to jump ship and leave the embattled retailer. Massod was also the chief technology officer, and his resignation becomes effective as of 2 December, according to a regulatory filing.
BBBY management is in turmoil
Masood is not the only one to leave the flagging company. In June the BBBY board pushed out chief executive Mark Tritton and chief merchandising officer Joe Hartsig.
The company’s chief accounting officer also left, and the group eliminated the chief operating officer this summer.
In September, the tragic news was released that the group's former CFO, Gustavo Arnal, jumped to his death from a luxury skyscraper in downtown Manhattan after allegations of fraud were made against him.
Investors may be asking, what next for BBBY stock? Is the company, famous for its home décor products, finally reaching the end of its reign as one of America’s top domestic merchandising suppliers?
Well, perhaps.
Experts are concerned that bankruptcy is on the cards.
With discretionary consumer spending on the decline due to rising inflation and interest rate hikes, retail stocks like BBBY are already having a difficult time as it is. But add into the mix managerial problems and poor business management and you have an even bigger disaster on your hands, which could lead to further complications down the road.
In July, credit reference agency Moodys (MCO) downgraded BBBY debt to the lowest possible rating. Moodys downgraded the company’s debt from CFR to Caa2. Which means Moodys believes there is a high possibility that BBBY will default on its debt in the next 12 months.
“The downgrades reflect the impact of Bed Bath's steep decline in revenues and EBITDA on its liquidity, free cash flow and credit metrics. Also considered are the challenges Bed Bath faces to restore its profitability. Inventory levels are not only elevated and misaligned with sales trends but are overweighted to private label product which must be cleared and replaced with national brands in the face of weaker consumer demand,” a Moodys (MCO) statement read.
“Additionally, the downgrades reflect governance considerations which include the company's rapid departure of its CEO and Chief Merchandising Officer, the completion of its $1bn accelerated share repurchase program with $40m of share repurchases in the first quarter of 2022 despite the company's weak operating performance and the ineffectiveness of its turnaround strategy to meet the continuing pressures on Bed Bath's operations and credit metrics.”
Then Moodys (MCO) hit BBBY with another blow last month and downgraded it again from Caa2 to Ca.
“The downgrades reflect governance considerations which include the company's announcement that it may pursue liability transactions [1] which Moody's would likely view as a distressed exchange to address its $284m of senior unsecured notes due in August 2024 in light of the continuing pressures on Bed Bath's operations and credit metrics,” said Christina Boni, Senior Vice President at Moody's Investors Service.
BBBY current debt stands at $3.53bn (£3.14bn) and the company is hoping that under the leadership of its new CEO, Sue Grove, who took over in June from ousted leader Tritton, things will turn around. But the company is still plagued by supply chain issues and inventory woes.
BBBY may face bankrupty
So, is BBBY heading to bankruptcy?
Well, Moodys think it might.
“Bed Bath's Ca corporate family rating reflects the very high likelihood of a default over the next twelve months. It also reflects governance considerations including the appointment of interim senior management and hiring consultants to support Bed Bath in its efforts deliver on its operational turnaround, which include inventory, cash management and balance sheet optimization,” Moodys (MCO) statement said.
“Despite its scale as the largest dedicated retailer of domestic merchandise and home furnishing with a national footprint, the company faces considerable default risk. Bed Bath faces a $284m notes maturing in 2024 and has announced its exploring a possible distressed exchange which would be viewed by Moodys (MCO) as an event of default.”
Moodys (MCO) believes that despite the major contraction of its business, the company completed its $1bn accelerated share repurchase program which included the buyback of $40m of common stock in the first quarter of fiscal 2022. The company's weak demand trends have continued which has weighed heavily on its profitability.
Even though Bed Bath and Beyond (BBBY) has recently taken actions to improve its liquidity, the company still needs to stabilize its operating losses and improve its working capital as it navigates a turnaround in an uncertain consumer environment.
Perhaps college student Jake Freeman can help save BBBY?
Data has shown that BBBY has been one of the most searched-for stocks on Zacks.com lately.
Analysts believe that if BBBY can bring its customers back into its stores, a turnaround will happen.
“They need to get the customer back into the store,” McShane said during the 29th annual Goldman Sachs retail conference in October.
Jason Haas, an analyst at Morgan Stanley believes that BBBY needs a drastic change in cash burn.
BBBY does have another option.
It could take the advice of a college student, called Jake Freeman who made $110m in the Bed Bath & Beyond (BBBY) rally this year. Back in July, Freeman wrote a scathing letter to BBBY saying: “BBBY is facing existential crisis for its survival. To effectuate its survival, BBBY needs to cut its cash-burn rate, drastically improve its capital structure and raise cash.”
Which route BBBY decides to take, only time will tell. But for now it seems the group needs to act fast if it's to avoid bankruptcy.
News 
Market Data 
Discover 
