Bed Bath & Beyond files for bankruptcy

New York (CNN) Bed Bath & Beyond, the store for seemingly everything in your home in the 1990s and 2000s, filed for bankruptcy on Sunday.

“Thank you to all of our loyal customers. We have made the difficult decision to begin winding down our operations,” a statement atop the company’s website said Sunday morning.

The company’s 360 Bed Bath & Beyond locations, as well as its 120 buybuy BABY stores, will remain open for the time being, as will the websites. The company secured a $240 million loan to help fund its operations during the bankruptcy.

But store closing sales will begin on Wednesday and Bed Bath & Beyond will close some stores. How many or what happens to its 14,000 employees depends on what happens next.

A bankruptcy filing does not necessarily mean that a company is bankrupt. Many large American corporations filed for bankruptcy, using it to rid themselves of debt and other costs they could no longer afford. But even if Bed Bath and Beyond emerges from bankruptcy, its future is not guaranteed.

The company said it would seek to sell all or part of its business. If it manages to find a buyer, Bed Bath & Beyond will halt store closures. But if a buyer doesn’t come forward, Bed Bath & Beyond will likely go into full liquidation and go out of business.

It’s also possible the company will emerge from bankruptcy as an online-only retailer, said GlobalData Retail analyst Neil Saunders.

“Ultimately, if it emerges from bankruptcy, Bed Bath & Beyond will be a shadow of its former self,” he said.

Bed Bath & Beyond had been a crown jewel of the era of so-called “category killers” – chains that dominated a retail category, such as Toys “R” Us, Circuit City and Sports Authority. These companies too eventually filed for bankruptcy as shoppers turned away from huge specialty stores in favor of online options like Amazon.

Chris Hammons unloads a bag of items she bought at a Bed Bath & Beyond store in Dallas, Texas September 23, 2009.

Bed Bath & Beyond has become famous for its pots and pans, towels and bedding stacked floor to ceiling in its cavernous stores – and for its ubiquitous 20% off coupons. Blue and white coupons have become something of a symbol of pop culture, and millions of Americans have ended up storing them in their cars, closets, and basements.

The company said customers will have Sunday, Monday and Tuesday to use their remaining 20% ​​off coupons. The company will stop accepting them on Wednesday. Instead, Bed Bath & Beyond expects to offer “deep discounts” on its products as part of its business closing sales.

The retailer has attracted a wide range of customers by selling name brands at discounted prices. Brands coveted a spot on Bed Bath & Beyond’s shelves, knowing it would drive big sales. In addition, the open store layout encouraged impulse purchases: Shoppers came in to buy new dishes and left with pillows, towels, and other items.

The stores were a staple for shoppers during the winter break and back to school and college, and Bed Bath & Beyond also had a strong baby and wedding registry business.

But the New Jersey-based company has been slow to respond to shopping changes and struggled to attract customers who had switched to Amazon, Target and other chains.

In its bankruptcy filing, Bed Bath & Beyond said it had $5.2 billion in debt and only $4.4 billion in assets. It secured $240 million in funding on Sunday to stay afloat just long enough to close its stores and wind down operations.

The company encouraged shoppers to seek out its discounted products later this week. Items purchased before Wednesday can be returned until May 24, but all sales after Wednesday are final. The store will stop accepting gift cards on May 8.

The era of supermarkets

Founded in 1971 by Warren Eisenberg and Leonard Feinstein, two veterans of the discount retail industry in Springfield, New Jersey, the chain of small linen and bath stores – then called Bed ‘n Bath – s first developed in the northeast and in California. , a new trend at the time. Unlike department stores, it did not rely on sales events to attract customers.

The company changed its name to Bed Bath & Beyond in 1987 to reflect its merchandise expansion and larger “supermarkets”. The company went public in 1992 with 38 stores and about $200 million in sales.

“We had seen the upheaval of department stores and knew that specialty stores were going to be the next wave of retail,” Feinstein said in 1993. “It was the beginning of the designer approach to linens. home and household items and we saw a real window of opportunity.”

Customers examine items in shopping carts at a Bed, Bath & Beyond store in New York City on January 18, 1994.

In 2000, those numbers jumped to 241 stores and $1.1 billion in annual sales. The 1,000th Bed Bath & Beyond store opened in 2009, when the chain had reached $7.8 billion in annual sales.

The company was somewhat iconoclastic. He spends little on advertising, relying instead on printed coupons distributed in weekly newspapers to attract customers.

“Why not just tell the customer that we’ll give you a discount on the item you want – not the one we want to list? We’ll send a coupon in the mail, and it’ll be a lot cheaper,” Eisenberg said in a 2020 New York Times interview.

The chain was known for giving store managers autonomy to decide which products to stock, allowing them to customize their individual stores, and for shipping products directly to stores instead of from a central warehouse.

The rise of online shopping

But as brick and mortar began to give way to e-commerce, Bed Bath & Beyond was slow to make the transition – a misstep made worse by the fact that home decor is one of the most common categories purchased online.

“We missed the mark on the internet,” Eisenberg said in a recent interview with The Wall Street Journal. (The co-founders are no longer involved with the company.)

Online shopping also weakened the appeal of Bed Bath & Beyond’s fan-favorite coupons, as consumers could find many cheaper alternatives on Amazon or browse a wider selection on sites like Wayfair (O).

However, it wasn’t just Amazon and online shopping that sank Bed Bath & Beyond.

walmart (WMT), Target (TGT) And Costco (COST) have grown over the past decade and have been able to attract Bed Bath & Beyond customers with lower prices and a wider range of merchandise. Discount chains such as HomeGoods and TJ Maxx also cut prices for Bed Bath & Beyond.

Without the lowest price or widest selection differentiators, Bed Bath & Beyond sales stagnated from 2012 to 2019.

Shoppers inspect cleaning products while shopping at a Bed Bath & Beyond store in New York on April 13, 2011.

Then the pandemic hit in 2020. The company temporarily closed all of its stores while rivals deemed “essential retailers” like Walmart remained open. Sales fell 17% in 2020 and 15% in 2021.

Additionally, Bed Bath & Beyond has employed several different leadership and turnaround strategies over the past few years.

Former Target executive Mark Tritton took the helm in 2019 with investor backing and a bold new strategy. It reduced national brand coupons and inventory in favor of Bed Bath & Beyond’s own private label brands.

But this change is alienating loyal customers from big brands. The company also fell behind on payments to suppliers and stores did not have enough merchandise to stock shelves. Tritton stepped down as CEO in 2022.

Strive to avoid bankruptcy

Bed bath and beyond (BBBY)has been on the verge of bankruptcy for months.

In February, it was able to avoid bankruptcy by completing a complex equity offering that gave it both an immediate injection of cash and a promise of additional funding in the future to pay off its debt. This offer was backed by private equity group Hudson Bay Capital.

But Bed Bath & Beyond said last month it had terminated the deal with Hudson Bay Capital for future funding and was turning to the public market to try to raise money.

The company also shrunk to save money. It announced earlier this year that it would close around 400 locations, but keep profitable stores open in key markets.

And the company tried to save money by not paying severance pay to some workers made redundant when stores closed.

Bed Bath & Beyond laid off 1,295 workers in New Jersey this month, just days before a new state law takes effect that mandates severance pay – equal to one week’s pay for each year of employment – ​​for workers who lose their jobs.

However, all these moves were not enough to prevent the once-dominant chain from going bankrupt.

And Bed Bath & Beyond is the latest retail chain to file for bankruptcy this year. Bankruptcies are piling up in the retail sector as interest rates rise and discretionary spending slows.

David’s Bridal, Party City, Tuesday Morning, mattress maker Serta Simmons and Independent Pet Partners, a pet store retailer, have filed for bankruptcy in recent weeks.

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