Bed, Bath & Beyond’s $375 million loan is temporary relief ahead of the holiday season

A customer walks into a Bed Bath & Beyond store in Novi, Michigan, U.S., January 29, 2021. REUTERS/Emily Elconin

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NEW YORK, Aug 30 (Reuters) – With Bed Bath & Beyond Inc (BBBY.O) set to disclose a financial lifeline – a loan of around $375 million – investors are hoping the interim CEO of the retailer, Sue Gove, will also provide details on how she plans to rebrand the chain and return it to profitability when she speaks on Wednesday.

Once known for offering many shoppers 20% off coupons, Bed Bath & Beyond has overhauled its merchandise in recent years to focus on own-brand or private-label products, including its Our brand cookware. Table. But the retailer’s strategy failed. Sales fell 25% and it lost $358 million in its first quarter ended May 28.

On Wednesday, investors will want an update on how Bed, Bath & Beyond is handling its excess inventory and private label strategy. According to Jane Hali & Associates analyst Jessica Ramírez, Bed Bath rejected one of its new private label brands, Wild Sage, after customers snubbed the products. With inflation near 40-year highs, investors want “greater clarity on pricing strategy going forward,” said David Klink, senior equity analyst at Huntington Private Bank. Using coupons to drive sales is “not a sustainable long-term strategy,” Klink added.

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Ramírez said that “more than anything”, the chain “needs an almost complete rebranding that will attract the customer”.

Investors are also hoping the retailer will disclose any progress it has made in finding a buyer for its buybuy Baby channel. The US baby gear seller, with more than 130 stores, could command between $630 million and $910 million, according to Wedbush analysts. But while a sale would provide initial cash, it would remove a source of future revenue, analysts warned.

Bed, Bath & Beyond’s biggest investor, Ryan Cohen, co-founder of online pet store Chewy Inc, sold his 9.8% stake earlier this month, sending shares down nearly 40 % after a meme-fueled rally.

Bed, Bath & Beyond said in late June that there was interest in the buybuy Baby chain from potential buyers, and Cohen encouraged the retailer to seek options for the chain earlier this year, according to a filing. of securities.

At Bed, Bath & Beyond, inventory rose 12.5% ​​in the quarter ending May 28. Between June 3 and August 22, at least 22 ships from Asia carrying 40 large containers of Christmas and Halloween merchandise arrived in US ports bound for Bed, Bath & Beyond stores and distribution centers, data from ocean freight reimbursement consultancy Ocean Audit shows.

The chain has closed about 200 stores in the past two years and may try to close more to save money, although it faces high costs to do so.

About 25% of Bed Bath & Beyond’s approximately 900 remaining stores are likely unprofitable, a source familiar with the matter said.

Bed Bath & Beyond will seek more rent relief from landlords in the future, the source said.

Bed, Bath & Beyond finalized a $370 million loan deal with investment firm Sixth Street last week. The company said in mid-August it was working with financial advisers and lenders to strengthen its balance sheet. Read more

In the quarter ended May 28, he burned through $332 million in cash, leaving him with a cushion of $108 million, even after borrowing $200 million from a line of credit. A year ago, the company had $1 billion in cash reserves.

Shares of the chain, which have fallen over the past month but still managed to more than double in value, closed up 9.3% at $12.11 on Tuesday ahead of the retailer’s expected announcements on Wednesday. Read more

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Reporting by Siddharth Cavale, Arriana Mclymore and Chibuike Oguh in New York; additional reporting and writing by Jessica DiNapoli; Editing by Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

Ariana McLymore

Thomson Reuters

Arriana McLymore reports on the business of law, including the diversity of the profession, business practices, legal education and the career cycles of lawyers.

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