Beth Bath & Beyond released a statement recently warning that bankruptcy could be on the horizon if it doesn’t improve its financial position. Due to low customer traffic, and high inventory levels, the company’s sales dropped more than 30% in the last year.

The statement said that the Company is still considering all strategic options, such as restructuring or refinancing its debt, seeking additional capital or debt, delaying or reducing the Company’s activities and strategic initiatives or selling assets and/or taking other measures including relief under the U.S. Bankruptcy code.

Wall Street didn’t like the news and the share of the company fell almost 30% by the end the day. This was its lowest level since 1993.

Bed Bath & Beyond Makes a Comeback

Bed Bath & Beyond is a well-known home goods retailer. However, sales have been low and foot traffic has been slow in its stores for a while. The company presented a turnaround strategy in August that included reducing costs and strengthening partnerships with other vendors.

Bed Bath & Beyond closed 150 stores and sacked 20% of its employees. Although this helped to lower expenses, sales are still significantly below what they were one year ago.

Partly, the company’s slow sales are due to a shift of consumer spending. As the housing market slows down, consumers are less inclined to spend money on houseware.

Consumers are concerned about inflation and the looming recession. Due to the company’s mounting debt, larger brands often hesitate to partner with Bed Bath & Beyond. This has meant that Bed Bath & Beyond hasn’t been able to gain much traction by partnering with other brands.

What’s Next for Bed Bath & Beyond?

Bed Bath & Beyond has been experiencing a loss of market share for a while and it seems that bankruptcy may be in the future. The company could file for bankruptcy to help restructure its debt and end leases at underperforming stores. Although it is unlikely they would prefer to file for bankruptcy, it may be an option that allows them to improve their structure and steer the ship towards clearer waters.

The company’s third quarter sales fell to $1.259 billion from $1.878 million a year ago. The company is short of liquidity, with $0.5 billion. It’s running out time to generate positive cash flows. Scott Batham, a Wedbush analyst, predicts that the company will run dry in 2023. This would make bankruptcy more likely.

If Bed Bath & Beyond goes bankrupt, other retailers like JCPenney and Walmart could be affected. Any negative effect on Bed Bath & Beyond’s financial situation will likely be temporary.

The company announced that it would close 130 additional stores in the country. This will affect landlords as well as foot traffic to nearby businesses. The company still owns 762 Bed Bath & Beyond stores in all 50 states as of November 2022.