- [Instructor] Each of these pins is a Bed Bath & Beyond
that closed in 2022.
That's about 20% of its stores.
Shares are at their lowest point since the '90s
after the company said it's facing.
- Bankruptcy. - Bankruptcy.
- Bankruptcy
- [Narrator] As sales collapsed,
Bed Bath & Beyond scrambled to cut costs
by laying off workers and closing those stores.
Here's what happened to the home goods chain
in the last six months that led
to a cash crisis, and a potential bankruptcy filing.
Let's turn back the clock to June
when Bed Bath & Beyond CEO Mark Tritton had a problem.
His strategy of scaling back coupons
and doing away with popular national brands
in favor of private labels was failing.
- [Mark] These are some of my favorites from the Haven line.
- [Narrator] And the company was struggling to stock shelves
since it had fallen behind on payments to vendors.
Sales had fallen by 25% compared to the previous year,
and net losses were up to over $350 million.
On June 29th, the company announced a leadership change.
- [Harriet] Sue Gove has been named
interim chief executive officer,
replacing Mark Tritton, who is leaving the company.
- [Narrator] At the time,
Gove said that Bed Bath & Beyond's.
- [Sue] Results are not up to our expectations,
nor are they reflective of our potential.
- It was not entirely surprising
because the company had reported a string
of poor earnings and falling sales,
and so it was well known that the company was struggling.
- [Narrator] In August, cash reserves,
key for paying vendors, were still low.
The company needed more cash
and was looking for a loan to make that happen.
On the 23rd, Bed Bath & Beyond announced
it had secured $500 million in funding,
which it hoped would help keep shelves stocked.
- Some vendors had not been paid in months,
and clearly, the company was struggling.
- [Narrator] While the loan could pay for more inventory,
it wasn't enough to keep every store open.
Bed Bath & Beyond announced it'd be closing 150 locations,
about 20% of its doors,
plus it would be starting layoffs that amounted
to 1/5 of its corporate and supply chain staff.
Just two days later,
the company suffered a different kind of loss.
CFO Gustavo Arnal died by suicide.
- At a time when a company is struggling financially,
to lose your CFO that like that is certainly a shock,
and certainly made things even more difficult for them.
- [Narrator] When second quarter earnings were released
at the end of September,
analysts said the company was facing
yet another cash crunch.
The $500 million loan had weakened Bed Bath & Beyond's
balance sheet with liabilities exceeding assets.
Still, the company felt.
- [Sue] Confident that our current liquidity
will enable the necessary strategic plans
we have implemented.
- [Narrator] But a few weeks later,
Bed Bath & Beyond announced it'd be making
a debt exchange offer where a company exchanges bonds
for secured notes to extend maturities,
and reduce interest expenses.
- The company was offering higher interest rates
in exchange for investors taking a haircut
on their principal.
- [Narrator] It meant note holders would lose money
but they'd be guaranteed something.
Stock prices dipped, then fell more
after Gove hosted a summit with suppliers
at the company's New Jersey headquarters to ask for support.
- She had several challenges.
One, suppliers, some of them had not been paid
in months, and two, the company had pushed out some
of these suppliers to make way for its private label brands.
Now it wanted the suppliers to come back.
Well, these suppliers had found other channels
to sell their goods.
So it was taking a lot
of convincing to get the suppliers back on board,
and I'm not sure they were entirely successful.
- [Narrator] These vendor woes were all happening
before the busiest time of the year for retailers:
the holiday season.
Bed Bath & Beyond was still struggling
to stock shelves just a few days before Black Friday.
Reports came out that more than 40%
of the retailer's products had been out of stock in October.
Some suppliers said they were still owed money
and would pause shipments until they were paid.
- If you have empty shelves, you're not going
to have people coming in and buying,
and then you're not gonna have sales,
and it becomes a vicious cycle.
- [Narrator] Sales didn't meet expectations
during the fourth quarter and on January 5th,
Bed Bath & Beyond announced it was preparing to file
for bankruptcy in just a few weeks.
A spokeswoman for Bed Bath & Beyond
said it hadn't made any final decisions.
And Gove said on the third quarter earnings call.
- [Sue] We are committed to updating all stakeholders
of our plans as they develop and finalize.
- [Narrator] In that earnings report,
the company said sales fell 33%,
and losses rose to $393 million.
- [Sue] Our business was built
around our loyal customers.
Listening and responding
to their preferences was at the center.
Veering away from that path has led
to our recent financial performance.
- [Narrator] The company also said
it is planning more layoffs
in an effort to cut costs.
- Bankruptcy is still not a certainty
but their ability to avoid it is shrinking.
You know, there were things they could have done,
such as sell their buybuy BABY chain for cash.
They chose not to do that, so their options are narrowing.
- [Narrator] News of an official bankruptcy filing
could come in the next few weeks.
(pensive music)