Jan 5 (Reuters) – Bed Bath & Beyond Inc (BBBY.O) It is preparing to seek bankruptcy protection in the coming weeks following poor sales and an inability to compete with major online and big-box retailers.
The U.S. home goods retailer is considering avoiding a debt payment as early as February 1, a source said, a common move companies on the brink of bankruptcy take to conserve cash.
Shares of the retailer, a category killer in products such as small appliances and bedding, fell 30% to close at $1.69 on Thursday after the company said it would report a significant third-quarter loss and there was considerable doubt about its potential. Continue as a concern.
The company said it is exploring several options to address its declining sales, including filing for bankruptcy. The retailer said it has not made a final decision on which course to take.
Bed Bath & Beyond had no immediate comment on any of the bankruptcy filings beyond Thursday’s announcement.
The company is paying interest on $1.5 billion in bonds outstanding as of Feb. 1, according to bond filings. The company is considering avoiding payments to save money, which would trigger a 30-day grace period before the company officially defaults, the people said.
Troubled retailers are seeking bankruptcy protection following the holiday season to take advantage of the cash cushion provided by recent sales. If the company seeks bankruptcy protection, it may seek financing from existing creditors to navigate the court restructuring, one of the people said.
After pursuing a strategy focused on its own private label products, the retailer’s fortunes plummeted. The management has changed its course to bring in shoppers of recognized national brands.
But on Thursday, signs emerged that this strategy has also failed to work, after sales fell 33% in the quarter ended Nov. 26, expecting to post a loss of $385.5 million due to lower customer traffic and lower volumes. Inventory availability among other factors.
The company is scheduled to report its full third-quarter results on Tuesday.
“The turnaround plan put in place last year is not working. … Put bluntly, the business is moving in the wrong direction at such a rapid pace that bankruptcy is the most likely destination,” said Global Data analyst Neil Sanders.
Bed Bath & Beyond has enlisted AlixPartners LLP, an alternative and consulting firm, to advise on options to resolve its financial problems, people familiar with the matter said.
In addition to AlixPartners, the firm is advised by restructuring lawyers at Kirkland & Ellis LLP and investment bankers at Lazard Ltd. (LAZ.N)One of the people said.
AlixPartners and Lazard declined to comment. Kirkland did not immediately respond to a request for comment. In a statement to Reuters late Thursday, Bed Bath & Beyond said it was “working with strategic advisors to evaluate all avenues to regain market share and improve cash flow” but could not comment further on specific relationships.
The company became a meme stock last year when its shares rose more than 400%. Avid investor Ryan Cohen, chairman of GameStop Corp (GME.N)He took a stake in Bed Bath & Beyond, which he later sold, causing the stock to fall.
Bed Bath & Beyond reported cash flow of $850 million in its previous financial update in the fall, but that burned to $325 million in the second quarter.
The company asked bondholders to exchange their shares for new debt, giving it more breathing room to turn around its business, but canceled the deal on Thursday after not receiving much interest from investors, according to a filing with the U.S. Stocks and Exchange. brokerage.
Bed Bath & Beyond previously considered selling its valuable BuyBuy Baby stores, which sell products for infants and toddlers, but held off on hopes that it would fetch a higher price later, Reuters reported.
buybuy Baby is the company’s “crown jewel” asset and will generate more interest from buyers if the parent company decides to sell it as part of its restructuring efforts, said DA Davidson senior research analyst Michael Baker. Valuation of business.
The chain’s value helped the retailer secure $375 million in debt last year, the maximum amount it can borrow.
Reporting by Aishwarya Venugopal in Bangalore and Siddharth Kavel in New York; Editing by Shaunak Dasgupta, Subranshu Sahu, Mark Porter and Anna Driver
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