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Bed Bath & Beyond in crisis as turnaround plan fails

US home goods retailer Bed Bath & Beyond is likely to file for bankruptcy protection as there is “substantial doubt about the company’s ability to continue” after sales floundered over Christmas-New Year.

In a business update, the company said a turnaround plan initiated at the start of the third quarter with a refocus on merchandising and inventory control while strengthening its financial position had failed to deliver anticipated results.

However, based on preliminary results for the quarter ending November 26, sales fell 33 per cent to US$1.259 billion reflecting lower customer traffic and reduced levels of inventory availability. A net loss of approximately $385.8 million was also registered.

Sue Gove, president & CEO at Bed Bath & Beyond, said: “Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macro-economic challenges.”

She added the company subsequently leveraged the liquidity gained from the holiday season to immediately pursue higher-in-stock levels to support key vendors.

“We continue to manage our financial position amidst a changing landscape and work with expert advisors as we consider all paths and strategic alternatives to accomplish our short- and long-term goals,” said Gove.

Liquidity ‘burnt through’

Neil Saunders, MD at GlobalData, said the business has “burnt through” most of its liquidity and will need to raise further funds to continue operating.

“Despite a desperate attempt to shore up finances and improve the customer experience, sales continue to slump and losses continue to mount. Put bluntly, the business is moving at rapid speed in the wrong direction with bankruptcy the most likely destination.”

The company informed investors that it continues to consider all “strategic alternatives” including restructuring or refinancing its debt, selling assets, seeking additional equity capital and obtaining relief under the US Bankruptcy Code, though the measures may not be successful.

According to Reuters, the company has interest payments on roughly $1.5 billion of bonds which are due February 1. It will likely be skipped to conserve cash triggering a 30-day grace period before the entity defaults.

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