Bed Bath & Beyond’s turnaround plan is ‘too late’ to avoid bankruptcy, expert says

Bed Bath & Beyond ( BBBY ) unveiled its turnaround strategy this week, but it likely won’t be enough to save the company, according to a restructuring expert.

“I’ve been in this business for 35 years in restructurings and turnarounds and … unfortunately, it’s a little too late,” Macco CEO Drew McManigle said on Yahoo Finance Live (video above). “They should have started this process last year if they were paying attention to the post-pandemic numbers.”

“I wouldn’t be at all surprised if the Chapter 11 filings have already been filed or are just waiting for a signature,” McManigle added.

Bed Bath & Beyond’s aggressive turnaround strategy includes plans to raise cash, close about 150 stores and cut 20% of its corporate and supply chain staff as it streamlines its organizational structure and eliminates the roles of COO and Chief Stores Officer. The retailer also secured $500 million in additional financing, including a $375 million loan from Sixth Street Partners, bringing its total liquidity to about $1 billion.

Bed Bath & Beyond’s stock has fallen 28% since Friday’s market close since the plan was revealed Wednesday.

McManigle warned that these steps may not be enough and that Chapter 11 bankruptcy is a “fait accompli” at this point.

“I’m also not convinced that this $500 million in funding will be enough cash,” McManigle said. “And I’m not convinced it’s going to make any difference in the long run whether they file for Chapter 11 or not because frankly, that’s the only way they’re going to be able to successfully restructure $1.3 billion in debt and get out of a lot of real estate.”

As of the fiscal first quarter, Bed Bath & Beyond had 955 stores, including 135 buybuy BABY stores and 51 Harmon or Face Value locations. Real estate is a key point in the retailer’s turnaround plan, and Bed Bath & Beyond noted that it will continue to “evaluate its portfolio and leases, in addition to staffing, to ensure alignment with customer demand and promotion strategy ».

MIAMI, FL - JUNE 29: Bed Bath & Beyond store is displayed on June 29, 2022 in Miami, Florida.  Bed Bath & Beyond Inc.  fired its chief executive, Mark Tritton, as the company's shares fell more than 55% this year and almost 80% in the past 12 months.  (Photo by Joe Raedle/Getty Images)

MIAMI, FL – JUNE 29: A Bed Bath & Beyond store is seen on June 29, 2022, in Miami, Florida. (Photo by Joe Raedle/Getty Images)

S&P Global Ratings reiterated its CCC rating and negative outlook on Bed Bath & Beyond following the retailer’s new financing announcement, writing that the company’s “recovery prospects remain very weak based on its continued cash burn, unfavorable macroeconomic conditions and our view that relations with its suppliers could be strained.”

The rating reflects “the risk that the company could default on its debt or go into restructuring in the next 12 months,” S&P Global added.

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