- Bed Bath & Beyond confirmed on Monday it plans to close all of its Harmon beauty product stores, along with 87 more of its flagship stores. The latest round of closures are in addition to plans announced last summer to close about 150 underperforming Bed Bath & Beyond locations.
- Last week, JPMorgan Chase said Bed Bath & Beyond defaulted on a $550 million asset-backed loan. In its Q3 report, the company said it had nearly $2 billion in long-term debt as its sales fell 33% year over year to $1.3 billion.
- At the start of January, Bed Bath & Beyond issued a “going concern” notice warning that it might file for bankruptcy.
Despite making moves to save the business, some analysts and investors think Bed Bath & Beyond is beyond rescue in its current state unless the distressed retailer files for bankruptcy protection.
The latest indicator of the New Jersey-based company’s financial issues is the decision to close Harmon, a health and beauty subsidiary. The company sells skin, hair, cosmetics, and personal health care products for all ages.
Established in 1971, Harmon became a subsidiary of Bed Bath & Beyond in 2002. Its core markets are in the Mid-Atlantic region of the U.S. On Monday, the company listed 50 Harmon stores on its website – 30 in New Jersey, 15 in New York, two in California and one each in Nevada, Florida and Connecticut.
“As we continue to work with our advisors to consider multiple paths, we are implementing actions to manage our business as efficiently as possible. The Company has initiated the closure of an additional 87 Bed Bath & Beyond and five BuyBuy Baby stores,” the company said in a statement provided to Retail Dive.
“This store fleet reduction expands the company’s ongoing closure program of approximately 150 lower-producing Bed Bath & Beyond banner stores. Additionally, the Company announced the closure of all Harmon locations. We will update all stakeholders on our plans as they develop and finalize.”
As of late November, Bed Bath & Beyond said it had 949 stores – 762 Bed Bath & Beyond stores in all 50 states, Washington, D.C., Puerto Rico and Canada; 137 BuyBuy Baby stores, and 50 stores under the Harmon, Harmon Face Values or Face Value banners.
Although Bed Bath & Beyond will still have a substantial national brick-and-mortar presence after the two latest rounds of store closures, analysts and investors expressed pessimism about the likelihood the company can turn itself around.
The company’s financial issues are also starting to show up on the shelves. In a recent visit to a New York City area store, Telsey Advisory Group analysts said in a Tuesday industry update note that “Bed Bath & Beyond stood out for the lack of inventory, particularly in the front of the store, kitchen and seasonal areas.”
At a Bed Bath & Beyond location in Paramus, New Jersey, in spite of a refreshed design, “the aesthetics of the store overall remained uninspiring with remnants of the prior layout. Inventory was clearly in short supply, with empty areas in seasonal and kitchen and what inventory was available was spread out,” Telsey analysts said in an emailed note.
The analysts also described the store as “very promotional” adding that “the store’s unimpressive foot traffic, inconsistent product stock, languished overall appearance, and heavy clearance activity, precisely [depict] the troubling state of affairs faced by the company currently.”
Bed Bath & Beyond has not yet reported its Q4 or 2022 annual financial performance. But based on the company’s recent financial reports, Wedbush analysts said in a note they predict the company will see a $743 million adjusted EBITDA loss for 2022. That’s up from Wedbush’s earlier prediction of $436 million.
The company had $500 million of liquidity at the end of the fiscal third quarter. It also faced supplier restrictions that compounded sales declines, and it was unable to exchange $300 million in senior bonds due in August 2024. Together those facts indicate that “time is running out for the company to generate positive cash flow,” Wedbush analysts led by Seth Basham said.
“We now forecast the company running out of liquidity in 2023, making a restructuring scenario in bankruptcy in the coming weeks far more likely,” the analysts continued. “We note that a bankruptcy filing would enable the company to more easily restructure this debt as well as cancel leases on unprofitable stores, removing a significant cash burden.”
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