The Tragedy of Bed Bath and Beyond
Feb. 25, 2023, 11:43 p.m.
Posted in Investing
Recently, the United States domestic retail store Bed Bath and Beyond Inc. has been a topic of discussion among citizens as their stock continues to fall. Bed Bath and Beyond was previously founded in 1971 by Warren Eisenberg and Leonard Feinstein. It is a merchandise store that serves people all over the world. This include countries such as the United States, Canada, Mexico, as well as South American countries and Puerto Rico. The corporation was also regarded as one of the largest companies in the states ranked among the Fortune 500. Additionally, analysts often assessed Bed Bath and Beyond as a positive example for retail incorporations in Forbes Global 2000. BBBY was also seen as one of the most successful companies among their competitors such as Walmart, IKEA and so on.
However, despite all of their contributions to the American economy, their legend seems to end this year. The company has begun to collapse and is eventually ready to file bankruptcy.
Meanwhile, it is a consensus that Bed Bath and Beyond Inc is facing a huge challenge to sell their products and according to KeyBanc Capital Markets analyst Bradley Thomas, “[they] believe the BBBY sales and margins continue to struggle mightily”. This can be a direct reason for the stocks to fluctuate and does not remain as consistent compared to other companies. The failure of this incorporation is not only limited to the sales, but also their failures to connect with the customers’ current habits, which will eventually lead to the brink of elimination.
In late 2019, the company used a huge amount of “activist investors” to attempt to raise the company from the danger. They launched private labels onto their products and attempted to change the store layouts. Unfortuneately, the company’s plan for self revival was not successful, due to the emerging Coronavirus-19 crisis at that time period. As the pandemic spread across the entire region of the United States, the government decided to lock the companies and retail stores down to maintain citizens safety. This was a huge shock to Bed Bath and Beyond, as they were enforcing a comeback to be one of the competitive companies once more. According to the statistics, the net losses evaluated in 2020 is around $150.8 million and the loss next year is more than double the loss of 2020- $559.6 million.
In summer 2022, the former CEO Mark Tritton decided to leave the company following the death of CFO Gustavo Arnal. This action elicits multiple staff cuts and store closures, which lead to a $1.2 billion in debt and significant drops in net sales over the years. The departure of Tritton definitely did not solve the major issues of the company but increased more obstacles for the company to overcome.
To stop the bleeding, the companies promoted Sue Gove as their new CEO in October, she was previously the director of BBBY when she joined the company in 2019. The new CEO continues to promote transformation of the company and is eventually making small progresses as she exclaims to “work with expert advisors as we consider all paths and strategic alternatives to accomplish our short- and long-term goals”. It is evident that BBBY desires to return to their original spot in the market, but the steps for their transformation has minor influence on their current situation. The company continues to focus on in-person retail stores, rather than online selling. This decision eventually cost the company a lot of money and lost their competitiveness among other retail stores who do choose to sell online.
Today, the stock for BBBY is sitting at $2.35 USD per share, which is an all time low in the past decades. After the peak of $7.8 USD per share a couple days ago, the company cannot find a way to climb up to the same level again. Although the company is putting all of their efforts for a significant turnaround and just avoided bankruptcy, it seems too late for the company to make any immediate change. Just as Doug Stephen suggests, “If Bed Bath & Beyond was going to survive, they needed to do something probably 10 years ago, to put themselves on a new trajectory toward a new model that would give consumers a sense of unique value, but they didn’t”.
In conclusion, Bed Bath and Beyond should be a good example for all the retailers and investors to learn from, the company fell from the peak of the world to today’s borderline survival. The important lesson here is to be able to change the company’s overall plan on time when necessary, rather than changing the overall layout when facing the brink of bankruptcy. The advice for investors right now is to invest in Bed Bath and Beyond in the short term, since the company is still reinforcing to survive. However, long-term investments are highly discouraged, especially not with your life-time savings, since the bankruptcy might come as soon as everyone else anticipated. Just as the Wedbush analyst Seth Basham suggests- if the company failed “to secure the additional $800m and/or an unsuccessful turnaround in 2023 could put the company back on bankruptcy’s doorstep”.