If Bed Bath & Beyond’s proposed stock sale doesn’t pay off, the struggling home goods retailer says that its next move may be bankruptcy.
In a March 30 regulatory filing, the Union-based company said it is putting up for sale $300 million worth of shares in an “at-the-market” offering program and will use the capital for strategic initiatives in Fiscal Year 2023, such as investing in merchandise inventory, increasing store footprint and realigning cost structure.
However, “If we do not receive the proceeds from the offering of securities covered by this prospectus supplement, we expect that we will likely file for bankruptcy,” the company said.
Bed Bath & Beyond also sounded the alarm in January that it was teetering on the edge of bankruptcy because it was running out of cash as sales dwindled. The company was able to avoid near-term bankruptcy after securing a financing package in February. That equity raise, led by hedge fund Hudson Bay Capital, provided Bed Bath & Beyond with $225 million upfront and the promise of another $800 million over the coming months.
As of now, Bed Bath & Beyond has received a total of $360 million as part of a roughly $1 billion financing package and recently amended the terms to raise an additional $100 million.
But, in the latest filing with the U.S. Securities & Exchange Commission (SEC), the company said it was terminating the previous equity offering as well as all outstanding warrants for Series A Convertible Preferred Stock, and turning to the public market.
While the retailer has not commented on what led to the change, sources with knowledge of the situation told Yahoo Finance that Hudson Bay Capital walked away from the deal amid growing concerns about Bed Bath & Beyond’s low stock price ahead of the next round of early April funding.
Shares were trading at 59 cents as of afterhours March 30, down more than 70% year over year.
As demonstrated by our plans for additional equity capital, our work remains focused on creating operational and financial avenues for further progress.
– Sue Gove, president and CEO, Bed, Bath & Beyond
In a statement, Bed Bath & Beyond President and Chief Executive Officer Sue Gove said, “The actions we’ve taken have enabled us to create the necessary financial runway to begin restoring our iconic Bed Bath & Beyond and buybuy BABY businesses … The customer experience remains our top priority and we are making meaningful progress to improve our business and calibrate to customer demand.”
“As demonstrated by our plans for additional equity capital, our work remains focused on creating operational and financial avenues for further progress. We believe today’s launch of the at the market program will expand the reach of our equity program and accelerate the return of our nationally recognized Bed Bath & Beyond and buybuy BABY brands back to prominence,” she said.
Following a prolonged sales slump, the company began implementing a turnaround plan in August 2022 that called for closing 150 lower-performing stores and laying off 20% of its corporate and supply chain workforce.
The company has taken other steps to improve its footing, which include working with suppliers to increase inventory levels and paying off outstanding interest payments, according to Gove. Bed Bath & Beyond has also made moves to shrink its brick-and-mortar footprint, starting with closing its entire chain of Harmon stores and its business operations in Canada.
Additionally, the retailer announced another round of store closures in the U.S., saying it ultimately plans to keep 480 units in business—360 of its namesake brand and 120 Buybuy Baby stores.
In her March 30 statement, Gove said the company is “on pace” to achieve its target number of stores by the end of April.
“In conjunction with our online business, these productive stores are pivotal to our omnichannel strategy and future profitability,” she also said.
“In addition to leveraging our recent capital to reinvest in high demand inventory, we are also developing a third-party consignment program that will allow us to fortify our product assortments by expanding merchandise availability from key supplier partners,” Gove said.
Alongside the March 30 business update, Bed Bath & Beyond reported preliminary results for the Fourth Quarter of FY 2022, with net sales of roughly $1.2 billion and comparable store sales declining in the range of 40% to 50%.
Bed Bath & Beyond also noted that negative operating losses have continued, but that it has not depleted free cash flow.
The retailer said it has not yet completed its FY 2022 Q4 and full year financial close, with plans to report those results at the end of April.-