Bed Bath & Beyond Shoppers Will Not Return

By Douglas A. McIntyre Published Feb 7, 8:30AM EST

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Bed Bath & Beyond Shoppers Will Not Return — © Bruce Bennett / Getty Images News via Getty Images

Bed Bath & Beyond Inc. (NASDAQ: BBBY) struck a deal to stave off bankruptcy. It was not enough to buy time to reverse its flagging sales, if time is a cure. Its shelves have been bare too long, and its store footprint has dropped too much for the money to be helpful. Even in liquidation, it is not clear whether investors will be made whole.
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The financing totals $1.025 billion. Taken together with other agreements, it is complex. At the outset, Bed Bath & Beyond will get $225 million. According to the Financial Times, it will get another $100 million from Sixth Street Partners. Beyond that, the paper reports the final $800 million comes from “Bed Bath & Beyond securities that require investors to purchase convertible preferred stock in future installments assuming certain conditions are met.” The “certain conditions” section should be cause for concern.
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The company’s deal cooled off common shareholders. After a one-day increase of 90% to $5.86, the stock dropped 32% on the news.

The company cannot combat the fact that people have left its store in tremendous numbers. Last quarter, comparable store sales dropped 32%. This pushed revenue down 33% to $1.26 billion. The company lost $391 million. (Click here for the 21 companies that make the most profit per second.)
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The company recently announced it would close 87 stores. This was on top of the 150 it said it would close last year. Its store count has gone from over 1,000 to about 750 in two years. Customers who have been used to shopping in the locations that have disappeared are unlikely to travel to another unless it is close by, which is unlikely given the shrinking store footprint.
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Another hurdle Bed Bath & Beyond has is that many of its shelves were bare over the holidays. Inventory problems, triggered by an inability to pay vendors, meant customers who traveled to stores might have been disappointed. Most of these people will not return.

Bed Bath & Beyond does not have a primary financial problem. Its problem is that it lacks enough customers to survive.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.