The squeeze is clearly on in retail — and companies with a history of operational missteps or balance sheets full of pandemic-era debts are succumbing to bankruptcy as shoppers pull back in a still uncertain economy.
Last week, it was David’s Bridal, which had to borrow to get through COVID-19 and ran out of liquidity and is looking to emerge from bankruptcy as a going concern, although perhaps with changes to its storebase.
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On Sunday, it was Bed Bath & Beyond Inc., which filed for Chapter 11 protection so it could wind down operations and sell off its assets after a failed turnaround and years of lackluster performance.
Bed Bath & Beyond secured roughly $240 million in debtor-in-possession financing from Sixth Street Specialty Lending to facilitate the process. The Union, New Jersey-based retailer’s 360 Bed Bath & Beyond stores and 120 Buybuy Baby stores are starting down the path to closure, although the company is also managing inventory so it can pivot should a buyer step forward in the court-run process.
Sue Gove, president and chief executive officer of Bed Bath & Beyond, said, “Millions of customers have trusted us through the most important milestones in their lives — from going to college to getting married, settling into a new home to having a baby. Our teams have worked with incredible purpose to support and strengthen our beloved banners, Bed Bath & Beyond and Buybuy Baby. We deeply appreciate our associates, customers, partners and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders.”
Bed Bath & Beyond named Target Corp.’s former chief merchandising officer Mark Tritton CEO in late 2019 to turn around operations, but his approach, which included an emphasis on private label goods, fell flat and was hampered by the pandemic and related supply chain issues. The private label emphasis resulted in consumers abandoning the retailer in droves as they went elsewhere to buy the brand-name products they used to purchase at Bed Bath & Beyond.
Tritton left in a management shake up in 2022 and the company was never able to make that turnaround.
“While management refused to go down without a fight, and explored every option to avoid bankruptcy, they simply could not defy gravity forever,” said Neil Saunders, managing director of GlobalData.
“If there is a single point of failure of Bed Bath and Beyond, it’s that the company stopped being relevant to consumers,” Saunders said. “Arguably, this goes back a long way thanks to the rise of online and the improvement of home offers at rivals like Target. Against this increased competition, Bed Bath & Beyond’s approach to retail — which lacked inspiration — was found wanting.
“The process, however, was accelerated by the botched turnaround of former CEO Mark Tritton,” he said. “His plans, which were essentially a carbon copy of what he had done at his former employer, Target, quickly alienated existing customers and failed to attract new ones.”
While changing consumer preferences, high inflation and worries of recession have industry experts watching for more signs of distress, most don’t expect a big wave of bankruptcies since the pandemic took out any of the companies that were on the edge financially.
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