Bed Bath & Beyond Files For Bankruptcy: What Happened?

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Bed Bath & Beyond finally filed for bankruptcy after months of financial distress and an already announced failure of the 52-year-old company. 

Bad plans, executives’ replacement, tragic events, and the pandemic contributed to the failure of the company, and now some workers might not see their severance pay.

BBBY filed for bankruptcy in New Jersey

On April 23, 2023, the well-established company founded in 1971 filed for bankruptcy in a New Jersey court. 

It requested to liquidate its assets in order to handle all the expenses related to the filing, the wages of its workforce, and the debts contracted with suppliers, along with the request to auction two brands – Bed Bath & Beyond and Buybuy Baby. 

In the near-term, stores and websites will work to support the company’s commitment to liquidation. 

BBBY – an announced failure and repercussions on the value of its stock

The company went public in 1992 and despite the competition of online retail giants like Amazon and the 2008 crisis, BBBY was able to maintain a solid reputation and customer base. 

Recently, the company made choices that might have negatively influenced its success, something Forbes called a self-imposed disaster

These negative choices, along with some unexpected events, sealed the fate of Bed Bath & Beyond – a fate that was to be imagined in January 2023. 

In 2019, Mark Tritton, former Target’s CEO, was chosen to lead the company. BBBY went through considerable changes in its merchandise offering. 

Following the positive results of Target, the focus shifted towards private labels instead of favoring national brands. 

In March 2019 the company had already reported over $130 million in net losses, and the change in strategy led by Tritton – who served as CEO of the company from October – proved wrong.

The pandemic further worsened the financial situation of the company. In June 2022, Sue Gove was named interim CEO, and then the role of CEO was confirmed in October. In spite of her plans to save the business, the company not only went through financial troubles, but it made headlines also for a tragic event like the suicide of Gustavo Arnal, CFO of the company. 

BBBY constantly missed expectations regarding earnings in 2022, with surprises that amounted to -3,166.70% in February reports, -103.60% in May, -74.10% in August and -63.70% in November (Data source: Yahoo! Finance).

In a business update published at the beginning of January 2023, the note reports several issues, among which “lower customer traffic and reduced levels of inventory availability”.

During the same month, the company started looking for a possible buyer and reported a default on the credit line opened by JP Morgan. 

To gather liquidity, the company launched a stock sale in February. It was expected to reach at least $1 billion, but the sale ended with just $360 million. 

Despite layoffs and cost cuts, the company launched a second stock offering in March. It was expected to gather at least $300 million, but in April the company had sold shares for only $48.5 million. 

The rumors of a possible bankruptcy have been circulating since January, and the effects on the price of BBBY stocks were evident. 

The all-time high of BBBY surpassed $80 per share in 2013, but it went down to around $0.29 on Sunday – over $19 per share less than in March of the previous year. 

What about workers? 

BBBY workers might not get their severance pay. As CNN reported, the employees of a BBBY retail store in New Jersey discovered they were laid off all of a sudden. 

While managers initially told them that they would receive severance pay, they didn’t. 

It looks like the company paid regularly only for workers of stores that were closed in previous rounds – since the company started closing shops and lay offs in 2022.

New Jersey now has a law that guarantees severance pay protection and imposes that large chains must notify workers at least 90 days before the lay off. Unfortunately, that law took effect a week after that specific store in New Jersey was closed.

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