Bed Bath & Beyond is at risk of filing for bankruptcy. How did it get here?

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In 2020, Bed Bath & Beyond appeared to be hitting its stride in its turnaround effort: remodeling stores, introducing private labels, overhauling its C-suite and selling off underperforming banners.

The retailer, like others selling home goods, was boosted by heightened demand during the onset of the pandemic as consumers actively sought out new products for their homes.

With Target veteran Mark Tritton at the helm, Bed Bath & Beyond was poised to succeed.

But in its most recent quarter, the retailer reported net sales fell 25% year over year, while comparable sales fell 23%. Its losses also grew: Operating loss increased by over $265 million and net loss widened by more than $300 million.

And Tritton — who helped in Target’s transformation — along with Chief Merchandising Officer Joe Hartsig, exited their positions in late June.

“The turnaround has failed and the business is in such a bad state with such serious declines in sales and profitability. It was inevitable he had to leave both because what he had been doing hadn’t worked but also because investors increasingly had lost confidence in the trajectory that he was taking the business,” GlobalData Managing Director Neil Saunders said. “I don’t think it signals anything positive at all for Bed Bath & Beyond.”

Now, Bed Bath & Beyond is a high default risk, and experts predict the company will likely need to file for bankruptcy or be taken private through a sale in the next 12 months. The retailer also reportedly hired Kirkland & Ellis — a restructuring specialist law firm that has helped retailers like Toys R Us, J.C. Penney, Neiman Marcus and others go through Chapter 11 — to help with its debt load, according to a Bloomberg report just last week.

So how did Bed Bath & Beyond get to this point and why wasn’t it able to capitalize on increased demand?

Longstanding problems

Bed Bath & Beyond’s problems began well before Tritton took over as CEO in late 2019.

The company’s board was overhauled in the spring of 2019, including the departure of its co-founders Warren Eisenberg and Leonard Feinstein from the board, following an activist investor campaign. In May that year, then-CEO Steven Temares exited his role after calls from those activist investors for his resignation. 

The company at the time was in a weak financial position. From 2018 to 2019, Bed Bath & Beyond had moved from being a low default risk to being a medium default risk, according to data from RapidRatings shared with Retail Dive.

“It was in a state of decay,” Wedbush analyst Seth Basham said. “They were losing traction with their customer base, traffic was down and their omnichannel platform was not strong.” 

When Tritton arrived in the fall of 2019, “he certainly did some things right initially to help stabilize the patient, so to speak,” Basham said, adding that under Tritton, the retailer introduced a number of initiatives, including expanding buy online, pick up in store and curbside pickup. “But [he] also came in at a time pre-COVID where they were able to benefit from some of the COVID demand.”

Missteps in the turnaround

While work certainly needed to be done to restore traffic and share to the business, Tritton’s turnaround had a number of missteps.

“It’s very interesting because nothing on the surface is wrong with the plan that he put out,” Saunders said. “It all sounds logical, it all sounds pretty sensible. There are actually some things in there that needed to be changed. The big problem was that he came in very gung-ho and he overnight just ripped up the old playbook of Bed Bath & Beyond. He started to put in place a strategy that had really worked very well at Target. But he really paid far too little attention to whether that’s what the Bed Bath & Beyond customers wanted.”

A lot of core customers were alienated as a result of the new initiatives, while the business attracted few new customers, Saunders added. “The strategy itself wasn’t necessarily wrong, but the execution of it was very inappropriate.”

The retailer experienced a boost in sales during the early months of the pandemic, which gave management a false read on its improvements, Basham said. 

“They were too optimistic that the improvements that they were seeing were because of internal changes they were making as opposed to market trends,” he said. “For probably the last 18 months they were losing market share. That would turn into a major issue if they persisted once the market growth slowed down. The market strength was unsustainable, so they definitely were misinterpreting that and misinterpreting the outlook for the market. This year, Mark anticipated that the market would still be growing. It’s turned down sharply in recent months.”

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Bed Bath & Beyond is at risk of filing for bankruptcy. How did it get here?

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