How the Famous American Retail Chain Fell from Grace

Shares of the well-known retail chain Bed Bath & Beyond Inc. plummeted in pre-market trading on Wednesday after the company announced that it might offer, issue, and sell shares from time to time. The stock dropped as much as 21 percent at 6:42 AM New York time, erasing earlier gains. The company also indicated that it plans to use the proceeds from any sale of its shares for, among other things, paying off outstanding debts, according to Bloomberg.

Over $370 million in debt

The announcement comes after investors prepared for a strategic update from the company before the market opened, but the focus of their ‘business and strategic update’ remains unknown. What is certain is that any movement by the company in the future will be scrutinized closely, given that last week’s reports indicated that they would mortgage their valued brand Buybuy Baby. Analysts from Morgan Stanley stated that cash spending and support for suppliers will also be a focus of the conference call that is expected to take place soon.

August has certainly been turbulent for Bed Bath & Beyond shares amid a resurgence of interest from small retail investors. Recall that the company’s stock surged from a low of $4.89 at the beginning of the month to a high of $30 in the middle of the month, after which the gains began to decline. The company recently found itself in an unenviable position after influential investor Ryan Cohen sold his stake.

Looking at this year from the beginning until now, shares have overall fallen by 17 percent due to growing concerns about declining sales and halting or limiting deliveries from certain suppliers. Nevertheless, the company could be saved by last week’s significant loan from investment firm Sixth Street of approximately 375 million dollars, and investors hope that interim CEO Sue Gove will soon provide more information on how she plans to rebrand the chain and return it to profitability.

Hundreds of millions wiped out in a few months

Once known for its 20 percent discount coupons, Bed Bath & Beyond has significantly changed its merchandise in recent years to focus on selling its own or private label brands, including the cookware brand Our Table. Time has shown that this strategy has failed, as sales fell by 25 percent, and the company lost $358 million in the first quarter ending May 28. 

The company’s inventory during the quarter increased by 12.5 percent, and between June 3 and August 22, at least 22 ships from Asia carrying 40 large containers of goods for Christmas and Halloween arrived at their stores and distribution centers, recent data from the maritime freight recovery consulting firm Ocean Audit showed. 

Bed Bath & Beyond has closed about 200 stores in the last two years, and it would not be unusual for it to close a few more stores in hopes of saving money. Approximately 25 percent of the roughly 900 remaining stores are likely unprofitable, Reuters learned – so the company is forced to seek relief from landlords to survive.