Bed Bath & Beyond to cut jobs, close stores in effort to recoup losses

Bed Bath & Beyond to cut jobs, close stores in effort to recoup losses
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Aug. 31 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) on Wednesday said it had closed deals for more than $500 million in new financing and that it would close 150 stores, cut jobs and overhaul its merchandising strategy in an effort to turn around its loss-making business.

However, investors remain concerned that the retailer’s plan, announced in a strategic update, will do little to improve Bed Bath & Beyond’s business, as shares fell 25%. The retailer also announced a plan to raise money by issuing new shares.

The big retailer — once considered a so-called “category killer” in home and bath products — has seen its fortunes falter after trying to sell more of its own brand or private label goods. The COVID-19 pandemic, the supply chain crisis and consumer reluctance to shop due to sky-high inflation have also affected the chain’s sales.

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Bed Bath & Beyond forecast a bigger-than-expected 26% drop in same-store sales for the second quarter and said it would keep its buybuy Baby business, which it had put up for sale.

Buybuy Baby’s sales efforts were boosted by GameStop Corp (GME.N) Chairman Ryan Cohen, the biggest investor in the company until this month, when he sold his 9.8% stake, sent the stock plummeting.

Once known for providing 20 percent off coupons to many shoppers, Bed Bath & Beyond has revamped its merchandise in recent years to focus on private label products, including Our Table brand cookware. Read more

The chain is now abandoning that strategy, shedding three of its private label brands and refocusing on national brands with labels including Calphalon, Ugg, Dyson and Cuisinart supporting that strategy, executives said on a conference call.

Executives said Bed Bath & Beyond is cutting about 20 percent of its corporate and supply chain workforce and eliminating the roles of chief operating officer and director of stores. The company has about 32,000 employees.

Senior management sought to reassure analysts that suppliers still support the company, a key indicator of its long-term financial prospects. Suppliers will ask for more money upfront or stop supplying goods if they think retailers can no longer pay them.

A sign is seen at a Bed Bath & Beyond store in Manhattan, New York, U.S., June 29, 2022. REUTERS/Andrew Kelly/File Photo

“While we’ve been able to burn through our cash, we’ve seen changes in the suppliers we manage,” Chief Financial Officer Gustavo Arnal said, adding that the company is managing the situation “one by one.”

First-quarter sales plunged 25 percent and lost $358 million, prompting the firing of CEO Mark Tritton in June. The company hired Sue Gove, an independent board director, to replace him on an interim basis.

On Wednesday, Gove said the retailer “continues to see significant positive momentum” and intends to build on its “deep legacy as a retailer”.

“While much work remains, our roadmap is clear and we are confident that the significant changes we announced today will have a positive impact on our performance,” she said on a conference call.

The retailer also said it extended an existing loan and obtained a new $375 million first-in, last-out loan and will launch a stock offering of up to 12 million shares.

Arnal said 50 to 60 stores will be closed in a “first wave” at the end of Bed Bath & Beyond’s fiscal year, which ends in February. The company has about 900 stores.

“They’re running out of cash and they’re desperate to raise money just to keep the business going,” said Jim Dixon, an equity trader at Mirabaud.

To improve its finances, the retailer said it will cut selling, general and administrative expenses by $250 million this year from last year and curb capital spending.

The company also estimates that comparable-store sales will fall 20% this year as it works on its transformation.

“Overall, we are pleased that the measures announced today … will ease the pressure on the company, allowing it to continue trading,” said Neil Saunders, managing director of GlobalData.

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Reporting by Uday Sampath and Deborah Sophia and Bansari Kamdar in Bengaluru; Additional reporting by Siddharth Kavale, Jessica DiNapoli and Ariana McLimore in New York; Editing by Arun Koiyur and Jonathan Oatis

Our standards: Thomson Reuters Trust Principles.

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