Despite raising $1 billion to stave off bankruptcy, Bed Bath & Beyond will begin shutting down operations in Canada, saying there is not enough capital available to save both its U.S. business and its subsidiary.
On Feb. 10, Bed Bath & Beyond Canada was granted an initial order for creditor protection by the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act, which is essentially Canada’s equivalent of Chapter 11 bankruptcy. The Canadian division – which includes 54 Bed Bath & Beyond stores and 11 Buybuy Baby stores – will now commence creditor protection proceedings to allow for a timely wind-down of operations and liquidation of inventory, the order said.
According to the filing, the Canadian business is insolvent and cannot restructure its operations without support from its American parent company.
Even with its recent equity raise, the Union-based home goods retailer is faced with “extremely limited funding and significant constraints upon its use of cash,” and therefore unable to continue turnaround efforts in the U.S. while trying to “properly resuscitate the Canadian business,” the order says.
For the nine-month period ending Nov. 26, 2022, Bed Bath & Beyond Canada assets were valued at about $480.1 million, while its total liabilities were worth about $429.7 million. It also posted a net loss of $99.5 million. According to filings, adjusted earnings for the past three financial years were negative and the Canadian arm of Bed Bath & Beyond contributed significant negative adjusted earnings margins to its parent company.
The order comes days days after Bed Bath & Beyond said it secured $225 million and anticipates an additional $800 million in future installments through an underwritten public offering. The capital raise, which is expected to help the company make debt payments and continue operations for now, comes a month after Bed Bath & Beyond warned it may go bankrupt.
However, due to the way the arrangement is structured, which calls for a series of multiple tranches, Bed Bath & Beyond said it expects to file for bankruptcy if the stock transactions are “not fully consummated,” the company said in a Feb. 9 filing with the U.S. Securities & Exchange Commission (SEC).
Despite introducing a turnaround strategy in August 2022 that called for closing 150 lower-performing stores and laying off 20% of its corporate and supply chain workforce, Bed Bath & Beyond continues to wrestle with mounting debt and losses, prompting the chain to try and conserve cash.
Bed Bath & Beyond last week revealed plans to close 150 more stores, on top of 250 previously announced closures, and ultimately plans to keep 480 locations open — 360 of its namesake store and 120 Buybuy Baby stores.
The latest round of closings mean Bed Bath & Beyond will have shuttered 400 stores in the past year — almost half of the 950 locations that were open in February 2022.l