Bed Bath & Beyond’s Loss Exceeds Warning as Bankruptcy Looms

(Bloomberg) — Bed Bath & Beyond Inc . reported a wider-than-expected net loss on Tuesday, underscoring the possibility of a bankruptcy filing in the coming months by one of the largest US home goods retailers.

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The beleaguered retailer said its net loss widened to $393 million in the three months ended November 26. Just last week, the company said it expected to report a net loss of $386 million. That compares with a loss of $366 million in the second quarter.

The company reiterated on Tuesday that it was considering “all strategic alternatives” to get back on financial track. “Multiple avenues are being explored and we are carefully determining our next steps,” Bed Bath & Beyond CEO Sue Gove said in a statement.

Last week, the retailer said those options included possible bankruptcy, a warning that came after it withdrew its bond swap offer. It had launched the plan in October to reduce its debt load. The company said on Tuesday that it had about $200 million in cash on hand.

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Bed Bath & Beyond reported a 33% drop in net sales to $1.3 billion in the third quarter, in line with preliminary results published last week. The company said the drop in sales was driven in part by its attempts to clean up its private label brands, part of a strategic pivot toward better-known national brands. Additional discounts also reduce revenue, the company said. The company has launched major promotions in an effort to drive traffic to its stores and website, but due to inventory issues, shoppers often can’t find what they need.

Read more: Bed Bath & Beyond’s spiral accelerates as suppliers lose patience

The retailer also said it was on track to close 150 underperforming stores it had targeted for closure last year, part of a wider cost-cutting plan.

“Our organization is more streamlined and we have deployed a more focused infrastructure that reflects our current business,” Gove said in the statement. The company is targeting $80 million to $100 million in additional cost savings, including spending and personnel cuts, he said. During a brief results call Tuesday, he did not provide details on how many employees may be affected.

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Further cost-cutting efforts may not be enough.

The retailer, founded in 1971 in Union, New Jersey, is likely to seek bankruptcy protection within the first two months of this year, Bloomberg News reported, citing people with knowledge of the plans. A ubiquitous brand in the US, Bed Bath & Beyond used to be a staple of college shopping lists and wedding registries.

Accelerating the Fall

Bed Bath & Beyond’s decline has been years in the making and has accelerated in recent months as suppliers grow increasingly concerned about the retailer’s financial future and make demands to receive payments in advance. Other manufacturers have lowered their credit limits with retailers to reduce the risk of not getting paid for their products.

This leads to less merchandise on store shelves during the crucial holiday season, which has exacerbated a vicious cycle of falling inventory levels, declining foot traffic and a drop in revenue — which has made it harder, in turn, to pay suppliers.

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Gove acknowledged those challenges during the call. “We are experiencing an acceleration in vendor payment terms and credit line constraints,” he said. “This led to lower acceptance” and lowered the level in stock to around 70%. Lack of inventory hampered sales, he added. In recent weeks, the company has been able to get that level above 80% in some categories, Gove said, which has helped drive stronger sales.

“This underscores our ability to achieve results when we have supplies,” Gove said during the call. The company did not take any questions from analysts, contrary to normal practice.

Shares of Bed Bath & Beyond rose as much as 13% to $1.83 in New York trading on Tuesday. The stock is down 88% in the past year through Monday.

(Update with shares in the last paragraph.)

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