Bed Bath & Beyond doesn’t have enough cash to pay down its debts and has defaulted on its credit line with JPMorgan Chase & Co., according to a securities filing. The shortfall could push the retailer closer to filing for bankruptcy even as it pursues strategic alternatives, which it warned “may not be successful.”
“The Company is undertaking a number of actions in order to improve its financial position and stabilize its results of operations including but not limited to, cost cutting, lowering capital expenditures, and reducing its store footprint including related distribution centers,” wrote Bed Bath & Beyond in the filing. “In addition, the Company will continue to seek reductions in rental obligations with landlords in its determination of the appropriate footprint, seek additional debt or equity capital, reduce or delay the Company’s business activities and strategic initiatives, or sell assets.”
Bed Bath and Beyond owes $550 million to JPMorgan as well as another $375 million to Sixth Street for a loan it took out in August 2022. The company also holds nearly $1.2 billion in unsecured notes with maturity dates in 2024, 2034 and 2044.
The retailer has been hit hard by declining sales, and the filing noted that vendors have tightened their credit terms while requiring earlier payments since Q2 2022, which ended in August 2022, due to an increase in “macro and micro economic challenges.” Comparable sales dropped 26% during that quarter.
Cautious vendors may be contributing to inventory challenges for Bed Bath & Beyond. The availability of products from certain key categories, including bathroom, kitchen and lighting, has dropped as low as 30%, according to an analysis by DataWeave. In comparison, Home Depot, Kohl’s, Lowe’s and Wayfair all maintained availability in the 50% to 80% range.
While the future remains challenging, bankruptcy isn’t the only path forward for Bed Bath & Beyond. The retailer also is pursuing a potential sale that would keep both its flagship banner and buybuy BABY open. Additionally, it has been seeking a lender that could offer the liquidity necessary to remain operational during a Chapter 11 restructuring.