“I’ve been in this business for 35 years in restructuring and turnarounds, and…unfortunately, it's just a little bit too little too late,” Macco CEO Drew McManigle told Yahoo Finance Live (video above). “They should have started this process last year if they'd been paying attention to the post-pandemic numbers.”
“I'm not going to be one bit surprised if the Chapter 11 petitions have already been drafted or are just waiting for a signature,” McManigle added.
Bed Bath & Beyond’s aggressive turnaround strategy includes plans to raise cash, close approximately 150 stores, and cut 20% of its corporate and supply chain staff as it streamlines its organizational structure and eliminates the COO and Chief Stores Officer roles. 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 stock was down 28% as of the market close on Friday since the plan was revealed on Wednesday.
McManigle warned that these steps may not be enough, and a Chapter 11 bankruptcy is a "fait accompli" at this point.
“I'm also not convinced that this $500 million in financing is going to be enough cash," McManigle said. "And I'm not convinced that it's going to make any difference in the long term whether they file a Chapter 11 proceeding or not because quite frankly that's the only way they're going to be able to successfully restructure $1.3 billion in debt and get out from underneath a lot of real estate.”
As of its 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 focal point in the retailer's turnaround plan, and Bed Bath & Beyond noted it will continue to “evaluate its portfolio and leases, in addition to staffing, to ensure alignment with customer demand and go-forward strategy.”
S&P Global Ratings reiterated its CCC credit rating and negative outlook on Bed Bath & Beyond following the retailer's new financing announcement, writing that the company's “turn-around prospects remain very weak based on its ongoing cash burn, unfavorable macroeconomic conditions, and our view that its vendor relationships could be strained.”
The rating reflects “the risk the company could default on its debt or pursue a restructuring in the coming 12 months,” S&P Global added.