Macco CEO Drew McManigle joins Yahoo Finance Live to discuss Bed Bath & Beyond's struggles and what it needs to do to turn the business around.
SEANA SMITH: All right. Well, Bed Bath & Beyond taking a huge hit today. Shares of it just over, just around 20% after the struggling retailer laid out plans to issue more stock, close 150 stores, lay off 20% of its staff, and also securing $500 million in new financing, all in an effort to stem the bleeding. Well, let's talk about where the company goes from here, and for that, we want to bring in Drew McManigle. He's a CEO of Macco.
Drew, it's great to see you. I know you have worked with hundreds of companies that have underperformed going through restructuring efforts or reorganization efforts. So this is a question everyone wants to know the answer to. What does Bed Bath & Beyond need to do to turn things around from here?
DREW MCMANIGLE: Well, I've been in this business for 35 years in restructuring and turnarounds, and they're doing it, unfortunately, it's just a little bit too little too late, if you will. They should have started this process last year if they'd been paying attention to the post-pandemic numbers. If you're even looking now,
Best Buy's numbers are down. Consumers are beginning to slow down if not stop-- stopping buying completely. And this is going to affect all the retailers, especially those with big box stores in multiple locations across the country.
- It feels like rearranging the deck chairs on the Titanic. Is there an example, when you look at past situations, that someone did emerge from this situation and lived to be a stronger, better company?
DREW MCMANIGLE: It's hard to say because if you look at Toys R Us as an example, Toys R Us went through what was ostensibly a successful Chapter 11 and they've rebounded now. So they're kind of back and making a rebound. So it's possible.
But in the retail front, you had so many examples that didn't work. Sears is a classic example. And again, what we typically see in restructuring situations where you're coming to the party late. I'm not going to be one bit surprised if the Chapter 11 petitions haven't already been drafted or are just waiting for signature.
I'm also not convinced that this $500 million financing is going to be enough cash. And I'm not convinced either, based on our experience, that it's going to make any difference in the long-term whether they file a Chapter 11 proceeding or not, because I quite frankly think 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.
RACHELLE AKUFFO: And so Drew, what kinds of conversations then tend to happen behind closed doors when you're trying to reassure investors while you're restructuring and trying to rebuild?
DREW MCMANIGLE: Well, again, it was hard to really make investors feel good about it at this point. When you watch what Mr. Cohen has done, what's happening to the stock generally, I doubt if there are any investors out there that feel good about Bed Bath & Beyond at all. And again, the steps that they're undertaking are fine, but they're COO is leaving.
They have an interim CEO who doesn't come from the restructuring business. That's not particularly helpful. They've hired Kirkland & Ellis which is one of the premier bankruptcy firms in the country that has been involved in innumerable retail and big bankruptcy cases across the country.
So the other point that I'd like to make is that the vendors are not going to be very happy. You know, typically when retailers get in trouble, vendors begin to put them on cash on demand. I suspect that is happening here. And vendors, whether they're in this country or in other countries, they've seen this movie before and I think that they're going to be pretty nervous as well.
SEANA SMITH: Well, Drew, you have certainly seen this movie before. If you could help just us understand the timeline of this, right? Is this something that takes one to two years to correct, or are we talking three to five, or even further out when we look into the future?
DREW MCMANIGLE: Well, I think a Chapter 11 filing is a Fait accompli. And whether it happens tomorrow, next week, next month, I just don't see how they're going to be able to restructure that debt load between the secured and the unsecured creditors without a Chapter proceeding. And I also don't think that they're going to be successful outside of a Chapter proceeding because their vendors are going to want some comfort, and the bankruptcy court and the bankruptcy proceeding can give them comfort that there is a debtor in possession financing in place that's going to essentially assure continued operations and critical vendor payments.
The Chapter 11 proceeding could take anywhere. Some of them have lasted, even big ones when they were restructuring support agreements, a matter of weeks. I would suspect Bed Bath & Beyond is working on theirs. And I would guess a hazard that it would be less than a year. And it might even entail a 363b Sale of their very valuable line, which is Buybuy Baby, which caters to infants and toddlers.
- Can't help but consider the collateral damage to the commercial real estate market. 900 empty stores perhaps down the road. Massive pieces of real estate. Drew McManigle, great insight. Really appreciate it today. Thank you.