Jan. 5 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) People familiar with the matter are preparing for bankruptcy protection in the coming weeks, after poor sales and an inability to compete with major online and retail retailers.
The US home goods retailer is considering skipping debt payments due on February 1, a source said, a typical move that has caused companies that were on the verge of bankruptcy distress to conserve cash.
Shares of the retailer, once a category killer in products such as small appliances and bed linens, closed down 30% Thursday at $1.69 after the company said it expected to report a large loss in the third quarter and that there was significant doubt about its ability to on it. Continue as a going concern.
The company said it is considering a range of options to address the decline in its sales, which includes declaring bankruptcy. The retailer said it hasn’t made any final decisions about which path to take.
Bed Bath & Beyond had no immediate comment on any bankruptcy preparations following Thursday’s disclosure.
According to securities filings, the company has interest payments on approximately $1.5 billion in bonds due Feb. 1. The people said the company is considering skipping payments to conserve liquidity, which would likely lead to a 30-day grace period before the company officially defaults on a payment.
Troubled retailers often seek bankruptcy protection after the holiday season to take advantage of the cash boost provided by recent sales. If the company seeks bankruptcy protection, one person said, it will likely seek financing from existing creditors to help it get through a court restructuring.
The retailer’s fortunes soured after it pursued a strategy of focusing on its own merchandise. Since then, the department has reversed course to attract shoppers of recognized national brands.
But on Thursday, there were signs that that strategy, too, was failing to take off as the company reported that it expected to post a loss of $385.5 million after sales fell 33% for the quarter ended November 26, due to lower customer traffic and lower levels. of stock availability among other factors.
The company is scheduled to report full third-quarter results on Tuesday.
“The turnaround plan that was put in place last year is not working… Frankly, the business is moving very quickly in the wrong direction with bankruptcy being the most likely destination,” said Neil Saunders, an analyst at Global Data.
Bed Bath & Beyond has enlisted transformation and advisory firm AlixPartners LLP to help advise on options for addressing its financial problems, people familiar with the matter said.
In addition to AlixPartners, the firm is advised by restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Lazard Ltd. (LAZ.N)said one of the people.
Alex Partners and Lazard declined to comment. Kirkland did not immediately respond to a request for comment. In a statement to Reuters late Thursday, Bed Bath & Beyond said it was “working with strategic advisors to assess all paths to regain market share and enhance liquidity” but could not comment further on specific relationships.
The company became a stock meme last year when its shares rose more than 400%. Activist investor Ryan Cohen, president of GameStop Corp (GME.N)He acquired a stake in Bed Bath & Beyond, which he later sold, resulting in a stock crash.
Bed Bath & Beyond said in its previous fall financial update that it had $850 million in cash but spent $325 million in the second quarter.
The company was also asking bondholders to swap their holdings for new debt to give it more breathing room to turn its business around, but canceled the deal on Thursday after not getting much interest from investors, according to US Securities and Exchange filings. commission.
Reuters reported that Bed Bath & Beyond had previously considered selling Buybuy Baby stores, which sell items for infants and toddlers, but held off in the hope that it would fetch a higher price later.
said Michael Baker, senior research analyst at DA Davidson, without offering the business’ assessment.
The value of the chain helped the retailer secure a $375 million loan last year, the most it could borrow.
Additional reporting by Aishwarya Venugopal in Bengaluru and Siddharth Kavali in New York; Editing by Chunak Dasgupta, Subranshu Sahu, Mark Porter and Anna Driver
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