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Bed Bath & Beyond Cuts Jobs, Closes Stores to Eliminate Losses

Bed Bath & Beyond Cuts Jobs, Closes Stores to Eliminate Losses
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August 31 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) on Wednesday said it had signed deals for more than $500 million in new financing and would close 150 stores, cut jobs and overhaul its merchandising strategy to turn around its money-losing business.

Investors are concerned that the retailer’s plan announced in a strategic update will do little to improve Bed Bath & Beyond’s performance, as shares fell 26.5%. The retailer also announced plans to raise money by issuing new shares.

The big-box chain, once considered a “category killer” in home and bath goods, has seen its fortunes plummet after trying to sell more of its own-brand or private-label goods. The chain’s sales have also been hit by consumer withdrawal due to the COVID-19 pandemic, supply chain crisis and high inflation.

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Bed Bath & Beyond forecast a bigger-than-expected 26% drop in same-store sales for the second quarter and said its divestiture would protect its Baby business.

The effort to sell Buybuy Baby was promoted by GameStop Corp (GME.N) Chairman Ryan Cohen sold the company’s largest investor, a 9.8% stake until this month, sending the stock down sharply.

Cohen’s speech followed a 300% surge in the value of its shares amid a speculative rally in meme stocks, a popular reference to stocks that rely more on social media hype than investors’ economic fundamentals. read more

VandaTrack, which tracks retail buying of the stock, said it expects retail investor interest in Bed, Bath & Beyond to wane given the current tough situation, but some investors have not given up on the stock entirely.

“Typically, meme stocks require exponential growth in inflows to continue rallying in a bear market environment,” the firm said in a research note published Wednesday.

THERE IS A LOT OF WORK AHEAD

Bed Bath & Beyond, once known for providing many shoppers with 20% off coupons, has revamped its products in recent years and focused on private label products, including Or Table brand bedding. read more

Executives said on a conference call that the chain is now abandoning that strategy, shedding three private label brands and refocusing on national brands with labels such as Calphalon, Ugg, Dyson and Cuisinart supporting the strategy.

Bed Bath & Beyond is cutting about 20% of its corporate and supply chain workforce and eliminating the roles of chief operating officer and chief store officer, executives said. The company has about 32 thousand employees.

A sign is seen at a Bed Bath & Beyond store in Manhattan, New York, United States, June 29, 2022. REUTERS/Andrew Kelly/File Photo

Top brass tried to reassure analysts that sellers still supported the company, a key indicator of its long-term financial prospects. Suppliers will ask for more money upfront or stop shipping if they believe retailers can no longer pay them.

Chief Financial Officer Gustavo Arnal added that the company is handling the situation “one by one”, adding that “as we manage our cash burn, we have seen changes in the vendors we manage.”

Sales fell 25% and lost $358 million in the first quarter, prompting the firing of CEO Mark Tritton in June. The company has hired Sue Gove, an independent board director, to replace him on an interim basis.

On Wednesday, Gove said the retailer “continues to see significant positive momentum” and intends to build on its “deep legacy as a retailer”.

“While there is much work ahead, our roadmap is clear and we are confident that the significant changes we are announcing today will have a positive impact on our operations,” he said on a conference call.

The retailer also said it expanded existing credit and took out a new $375 million “first-come-first-served” loan and will launch an offering of up to 12 million shares.

Bed Bath & Beyond will close 50 to 60 stores in the “first wave” toward the balance of its fiscal year, which ends in February, Arnal said. The company has about 900 stores.

“They’re running out of cash and need to raise cash to keep things going,” said Jim Dixon, an equity trader at Mirabaud.

To improve its finances, the retailer said it would cut sales, general and administrative expenses by $250 million this year compared to last year and rein in capital spending.

The company also estimates that comparable store sales will fall 20% this year as it works on a transformation.

Neil Saunders, managing director of GlobalData, said: “We believe the measures announced today … will reduce pressure on the company and allow it to continue trading.”

Shares of the retailer closed the day down 19.8% at $9.71.

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Reporting by Uday Sampath and Deborah Sophia and Bansari Kamdar in Bengaluru; Additional reporting by Siddharth Cavale, Jessica DiNapoli and Arriana Mclymore in New York; Edited by Arun Koyyur and Jonathan Oatis

Our standards: Thomson Reuters Trust Principles.

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