The structure of the Bed Bath & Beyond Inc. bankruptcy likely to hit in the coming weeks will revolve mainly around the fate of its prized Buybuy Baby brand, which comprises much of the company’s value.
(Bloomberg) — The structure of the Bed Bath & Beyond Inc. bankruptcy likely to hit in the coming weeks will revolve mainly around the fate of its prized Buybuy Baby brand, which comprises much of the company’s value.
Just how valuable the lauded brand really is after recent sales declines will determine the company’s outlook once it hits court.
Bed Bath & Beyond’s options in Chapter 11 include pursuing a sale of either the baby clothing, accessories and furniture brand or the whole company, as well as seeking financing from new or existing investors to help it turn the business around — a tall order given the company’s persistent decline. Any path will likely include further store liquidations and layoffs to stem cash burn; the company last year announced 20% job cuts and 150 store closures as part of its turnaround plan.
Asset sales are Bed Bath & Beyond’s best bet to generate revenue and repay creditors in Chapter 11 — but even the crown jewel has lost its luster lately, dimming those prospects. Sales at Buybuy Baby fell by a percentage rate in the “high teens” during the quarter ended Aug. 27, the company said. Overall, net sales fell 28% that quarter.
The baby brand was hard to put a price to even when it seemed to soar, since its value is one of intellectual property. Some analyst estimates put it at $1 billion or more in early 2022, when equity purchases by GameStop Corp. Chairman Ryan Cohen boosted sentiment. Cohen himself insisted the brand could even fetch “several billion dollars.”
Cohen sold his stake in August, and Bed Bath & Beyond’s overall market capitalization now stands at just $169 million, according to Bloomberg data. The shares fell as much as 25% to $1.27 in New York trading Friday.
Bed Bath & Beyond had 768 stores as of Aug. 27, the most recent information available, while its Buybuy Baby and Harmon brands had 187. The company began to shutter around 20% of the Bed Bath & Beyond banner stores in the fall. As of the end of August, the company said it had around 30,000 total employees before the planned dismissal of around 20% of its corporate and supply-chain staff.
The Union, New Jersey-based retailer will provide on update on its store and staffing numbers on Jan. 10 when it reports quarterly earnings, a spokeswoman said.
Revenue from asset sales would serve to repay creditors starting with Sixth Street Partners, which extended a $375 million rescue loan to the company in August in exchange for a first claim on Buybuy Baby and other assets.
If no attractive bids for the brand emerge, Sixth Street could opt to “credit bid,” or offer the value of its existing loan, for the asset. Sixth Street would then be left to operate the brand itself or find an operating partner.
–With assistance from Jeannette Neumann.
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