The financial and operational situation at Bed Bath & Beyond Inc. (NASDAQ: BBBY) is deteriorating quickly. Like a handful of other large, battered retailers, if it cannot sharply reverse course, it could be headed toward bankruptcy.
The retailer’s stock is down 61% in the past two years to $11.15 a share. By the scale of other troubled retailers, the drop is not extraordinary. However, it is a sign that investors believe that the company’s troubles will not end soon, if at all.
Bed Bath & Beyond announced earnings recently. Revenue shrank from $2.75 billion in the period a year ago to $2.57 billion. The drop in gross profit was worse, from $964 million to $887 million. The net income trend was much worse. Bed Bath & Beyond posted a bottom-line loss of $371 million, compared to a profit of $44 million in the same period of last year. The company pointed out that “Goodwill and other impairments” were $401 million, a terrible sign, not looking back at the company but likely looking forward.
Comments by Mary A. Winston, interim CEO, sounded as hollow as comments by other retailers on the ropes. In part, she said, “Bed Bath & Beyond is an iconic brand with tremendous opportunity and we recognize that there needs to be a fundamental change in our approach to executing the Company’s business transformation.” Such a transformation relies on whether people want what a retailer sells. Any other efforts to turn the company around are futile, unless cutting costs toward oblivion is an option.
How much time does Bed Bath & Beyond have to improve its fortunes? It is not possible to answer with any specificity, because it depends on whether the sales erosion quickens. At the end of the most recent quarter, the company had $700 million in cash and $202 million in short-term investments. It also had $1.49 billion in long-term debt and $1.76 billion in operating lease liabilities.
Among Bed Bath & Beyond’s short-term options is to close some of its 1,536 stores. That, however, does no more than buy it time.