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Bed Bath & Beyond’s Fizzling Rally Narrows Options for Cash Infusion

 


Home-goods retailer hunts for lenders after Ryan Cohen’s stock sale made issuing shares less likely

Bed Bath & Beyond Is in Crisis Mode. What Went Wrong?
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Bed Bath & Beyond Is in Crisis Mode. What Went Wrong?Play video: Bed Bath & Beyond Is in Crisis Mode. What Went Wrong?
After years of declining sales, Bed Bath & Beyond is facing an existential crisis. WSJ’s Suzanne Kapner explains why the company has fallen on hard times and looks forward to what’s next for the retailer. Photo Illustration: Laura Kammermann/WSJ


Bed Bath & Beyond Inc.’s financing options to help staunch its cash bleed have narrowed after billionaire activist Ryan Cohen sold all his shares in the company last week. Now, the struggling retailer is under more pressure to persuade lenders to provide it with fresh funds.

Since Mr. Cohen on Wednesday announced plans to sell his entire 10% stake, many of the individuals who followed him to invest in the retail chain’s shares have also sold. Its stock slid more than 60% over two days to close at $11.03 on Friday. Before that, its shares had more than quadrupled this month through Wednesday.


The falling share price has made it less likely that the retailer can fix its financial problems by issuing stock, as other struggling companies have done when they suddenly sparked the interest of bullish individual investors.

The company has signaled it has to raise cash; while it has said it should be fine for a year, its business remains in decline. It has been working with restructuring consultant Berkeley Research Group LLC to improve its cash, balance sheet and inventory positions, the company said in June.

Bed Bath & Beyond didn’t respond to requests for comment. “We are continuing to execute on our priorities to enhance liquidity, make strategic changes and improve operations to win back customers, and drive cost efficiencies,” company spokesman Eric Mangan has said previously.
Billionaire Ryan Cohen sold his entire 10% stake in Bed Bath & Beyond.PHOTO: MARK ABRAMSON FOR THE WALL STREET JOURNAL

The company’s sales in the latest quarter declined 25% from a year earlier. In late May, it had about $108 million in cash reserves, down from $440 million in February. In financial filings, it said that it had a solid liquidity position and could generate cash it needed from an existing credit line and its operations for the next year.

Recently, it has been hunting for $375 million in debt to pad its cash levels and help pay down existing debt, people familiar with the matter have said. A loan deal would help reassure suppliers and provide liquidity to fund inventory for the crucial holiday shopping season.

Law firm Kirkland & Ellis LLP is advising the company on the financing, according to a person familiar with the situation. Bloomberg earlier reported on the law firm’s work with the company.

The Union, N.J., retailer has been reaching out to vendors to try to negotiate longer payment terms, the person said. One firm that finances suppliers has stopped providing credit on shipments to Bed Bath & Beyond, this person said, a sign of concern in the retailer‘s ability to pay vendors.




Still, there is recent precedent for troubled businesses to defy debt markets to generate shareholder value. Professional investors largely assumed that Hertz Global Holdings Inc. HTZ -2.87%▼ was valueless after it filed for bankruptcy in 2020, but it was amateur stockholders who won big betting the rental-car business would recover beyond the pandemic.

AMC Entertainment Holdings Inc. AMC -6.58%▼ also sold $2.2 billion of equity to get through the pandemic after becoming a favorite of individual traders, despite severe financial strains. Debt financing also requires confidence in Bed Bath & Beyond rebounding from operating missteps, including plowing money into private-label brands that alienated customers and had poor sales.

As the company adds name brands back, some suppliers are no longer giving the retailer the preferential treatment it once enjoyed, according to other people familiar with the matter. Some suppliers that once sold at Bed Bath & Beyond exclusively have broadened their distribution to include other retailers, the people said.

If the home-goods retailer, known for its large assortment of products, manages to get fresh funding, it would ease the pressure by suppliers who might further tighten payment terms or demand cash upfront for merchandise. A tightening of vendor payment terms to 30 days from 60 days would roughly double the quarterly cash burn to $400 million from about $200 million estimated for the coming quarters, an analyst at Bank of America said in a note in June.


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