BBBY goes into bankruptcy, shares plunge 20%

Bed Bath & Beyond (BBBY) shares plummeted further on Monday after the struggling home retailer filed a long-anticipated bankruptcy appeal on Sunday.

In its Chapter 11 plea to the Bankruptcy Court for the District of New Jersey, Bed Bath & Beyond reported assets and liabilities of between $1 billion and $10 billion, with the company having received roughly $240 million in debtor-in-possession finance from Sixth Sixth Specialty Lending. When a company is in bankruptcy, the lender that provided debtor-in-possession financing (DIP) has priority over any other creditors of the company.

Desperate hope for a buyer

During the bankruptcy process, Bed Bath & Beyond plans to keep many of its locations open, but it hopes to close all 360 Bed Bath & Beyond stores and 120 buybuy Baby stores and sell off any remaining inventory by the end of June. As a result of the change, some 14,000 jobs will be lost. However, if it can find a buyer for its retail assets, the company said it might “pivot away” from shop closures.

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Since the beginning of the year, the company has been sounding the alarm that bankruptcy is a real possibility due to declining client traffic and inventory levels, among other issues.

Bed Bath & Beyond was in poor financial condition and desperately tried to avoid bankruptcy by closing stores, laying off employees, finding a private investor, raising capital through the public markets, and even having another vendor pay for its merchandise. Bed Bath & Beyond’s bankruptcy filing this year adds to the long list of struggling stores that have done so since the epidemic began, including Party City and David’s Bridal.

“Bed, Bath & Beyond fell between the racks, unable to compete with the cut-price offerings of rivals like TJ Maxx and value ranges of Target, and with their products not seen as little luxuries worth paying more for,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

According to BofA analysts, the closing of Bed Bath & Beyond will benefit other retailers, including Walmart, Amazon, Target, Wayfair, and Williams-Sonoma.

UBS sounds pessimistic about the retail sector

As a result of the BBBY bankruptcy, UBS’s fresh research highlights the importance of store running expenses, including rent in upscale shopping centers and hourly employee compensation.

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UBS retail expert Michael Lasser predicts that 50,000 stores out of the present base of 940,000 stores in the United States will shut by 2027. This estimate does not include gas stations or restaurants.

“While there was a pause on store closures over the last few years, we believe this activity is set to sharply accelerate moving forward,” Lasser said.

According to Lasser’s research, the retail sectors that will experience the biggest closures are apparel, accessories, and consumer electronics, with an estimated 23,000 outlets closing in total.