Bed Bath & Beyond – Solvency Risks & Outlook Amid Potential Bankruptcy

With consideration to the recent news flow around Bed Bath & Beyond’s struggles and the concern risk that was issued, what would you summarise as the 2-3 most significant factors that have contributed to the company’s positioning? Of course, we’re speaking about a number of years of strategic missteps and attempted turnarounds.

Thinking about the role of private label, we recently saw a phasing out of national brands. How have you seen Bed Bath & Beyond try to respond to this?

With consideration to the dynamic you mentioned and the missteps Bed Bath & Beyond took with the alienation of customers and the private label brands, if you were to give the company a hypothetically healthy balance sheet right now and an ability to raise capital, what would be the key strategy for it to regain market share and customer losses?

You brought up Buybuy Baby, which has been a gem in the Bed Bath & Beyond brand for the past several years while the company has struggled. Thinking about what might be its most attractive assets in the event of a liquidation sale, speaking towards its distribution channels, real estate and the Buybuy Baby brand itself, what valuation would you put onto that as a potential standalone company?

What potential acquirers do you think make sense for the Buybuy Baby brand? If we’re thinking about it in terms of a trade or another retail purchasing the brand, or perhaps a financial service institution, do you see any competitors who would probably be very attracted to this brand?

What are your thoughts around the major mass merchant retailers – players such as Walmart and Target? When thinking about the lack of a point-of-sale system that you mentioned for Bed Bath & Beyond, do you think integration would be realistic for a much greater acquirer that might already have these internal systems very robustly set up?

Moving away from Buybuy Baby and thinking about the assets still under Bed Bath & Beyond as a brand itself and the value of that brand, do you see any cost synergies? Do you see locations that are operational being of value to any major competitors or retailers adjacent to the space that might make Bed Bath & Beyond an attractive acquisition target?

We recently saw announcements of the closure of approximately 150 Bed Bath & Beyond stores and further employee headcount reductions. You shared your outlook that you don’t see the likelihood of the company’s survival, but if we had to think about a case where it’s downsized significantly, and perhaps within that much smaller hypothetical position it gets acquired, where would you tailor it or what strategy would be viable for it to focus on? Do you see Bed Bath & Beyond perhaps becoming a much more D2C-oriented brand? What would that look like in terms of the product mix and core consumer?

In terms of a hypothetical downsized Bed Bath & Beyond, do you believe the company could be more competitive when we’re thinking about more localised markets where it has historically been strong? What regional areas do you believe it could still maintain a foothold in if it were to be acquired?

With consideration to what you mentioned around the alienation of Bed Bath & Beyond’s core consumers, in the hypothetical scenario we’re discussing, where do you think it makes more sense for the company to focus in terms of consumer demographics? Is it coming back to that old core consumer – the college-age student – and perhaps still focusing on discounting?

What is your impression of Bed Bath & Beyond’s current leadership and its strategy? If you’ve had the opportunity to read recent commentary, how do you assess CEO Sue Gove’s approach with the company thus far?

What flexibility still exists for Bed, Bath & Beyond, if any, to try to remedy the vendor relationships? What are your thoughts on possible negotiations of terms or what the company could promise to try to recover some inventory losses, which was mentioned in its Q3 2022 earnings call?

If Bed, Bath & Beyond were acquired, the company would have a bit more capital and freedom to work with. Do you think its brand is significantly damaged to the point that these vendor relationships would be difficult to remedy even under new ownership?

If you had to reimagine Bed, Bath & Beyond or draw a comparison to competitors, what would be 2-3 key takeaways or lessons learned from this brand? How might you imagine the company in a different way, where it would be in a healthier position?

Considering the significant amount of cash-burning we’ve seen from Bed Bath & Beyond, where do you think the largest of that bloat, in terms of OPEX, is coming from?

Coming back to the scenario of complete liquidation for Bed Bath & Beyond, what are your thoughts on the greater competitive landscape impact that would have, in terms of downward pricing pressure and room to move in markets where the company is still strong?

Let’s discuss how Bed Bath & Beyond’s core consumer – gen Z and younger millennials – has evolved in recent years, and the requirement of legacy retailers to adapt. Could you highlight 2-3 significant trends from the consumer-end perspective that you’ve seen become particularly relevant in recent years, looking beyond this particular company briefly?

Keeping consistent with recent trends, did you note any observations from the 2022 holiday season? Of course, the going concern issue came in light after a particularly a disappointing season for Bed, Bath & Beyond. Off the top of my head, I would attribute this to the company’s lack of inventory, among a slew of other issues. What are your thoughts on its overall performance, with consideration to the macro environment not just for Bed, Bath & Beyond, but the sector as a whole?

Do you have reason to be a little bit more confident in terms of the recent CPI that came out, with inflation seeming to relax a little bit? Have you seen some normalisations within the supply chain with respect to news around China’s Zero-COVID policy? What are your thoughts on relationships with suppliers and the pricing being quoted by vendors?

How might everything we’ve just discussed impact overall discretionary spending? Looking at Bed Bath & Beyond’s key competitors, what’s your impression of At Home Group and its market positioning, considering the macro trends you shared some colour on?

How might you estimate top-line performance for At Home Group and similar comps, and margin contribution over the next 6-12 months?

Do you see price normalisations coming within the next 6-12 months if inflation is relaxing right now? A common trend we’ve seen is that volume losses were recouped by pricing actions, even if they were moderating with consideration to the consumer base. What are your thoughts there?

Outside the scope of Bed, Bath & Beyond, I’d like to discuss where inventory dynamics are now for home furnishing and product retailers. How do you think the company will be positioned in the short term, perhaps by mid-2023, with respect to where the supply chain is now and the strategy a lot of retailers have taken to try to liquidate excess inventories?

Would you like to highlight any other factors as it relates to Bed, Bath & Beyond’s current position and outlook towards reconstruction or liquidation?