Originally posted by Linda Moss, CoStar News
Bed Bath & Beyond plans to wind down its operations in Canada, closing 65 stores because the chain said it can no longer afford to provide them with financial support even after raising more than $1 billion in a stock sale last week.
The Union, the New Jersey-based retailer, which staved off filing for bankruptcy protection in the United States, will be closing its 54 Bed Bath & Beyond and 11 Buy Buy Baby stores after failing to find a buyer for those Canadian businesses. The company unveiled its plans in a 37-page court filing Friday in Ontario, seeking protection under the Companies’ Creditors Arrangement Act, which is similar to U.S. Chapter 11 bankruptcy law.
“As we continue to drive forward in our turnaround, and manage our business as efficiently as possible, Bed Bath & Beyond Inc. has made the decision to no longer support a Canadian operation,” the retailer said Monday in a statement. “As such, Bed Bath & Beyond Canada has commenced CCAA proceedings to initiate a wind-down of Bed Bath & Beyond and Buy Buy Baby stores in Canada. Bed Bath & Beyond Canada has communicated this difficult news with associates.”
In Canada, Bed Bath & Beyond has about 387 full-time employees and 1,038 part-time employees.
The Canadian closings are in addition to the expansive reduction of its physical footprint that Bed Bath & Beyond is undertaking in the United States as it continues to try to mount a turnaround.
Last week, the retailer announced a new round of cutbacks, saying it had initiated “incremental store closures in its Bed Bath & Beyond banner with an ultimate operating goal of approximately 360 stores, in addition to approximately 120 Buy Buy Baby stores, across the U.S.” The retailer also pulled the plug on its Harmon beauty goods chain.
As of Nov. 26, the company reported it had 949 stores, including 762 Bed Bath & Beyond locations in all 50 states, Washington, D.C, Puerto Rico and Canada, 137 Buy Buy Baby stores and 50 Harmon stores.
Unprofitable Canadian Division
Bed Bath & Beyond is still reeling from the repercussions of reduced foot traffic from the pandemic, inventory woes and a merchandising strategy focusing on private labels rather than national brands that didn’t click with shoppers.
The company saw mounting losses and dropping sales in a situation that came to a head last month when it said it might be forced to file for bankruptcy protection. It was notified that it had defaulted on some debt payments.
The company got a boost last week when it completed a more-than-$1 billion stock offering. But those funds are not enough to salvage both Bed Bath & Beyond’s U.S. and Canadian operations, according to its court filing.
“Faced with extremely limited funding and significant constraints upon its use of cash, the Bed Bath & Beyond Group has reluctantly concluded that there is not enough capital available (even with the lifeline provided by the offering) to restructure both its business in the United States and properly resuscitate the Canadian business to achieve profitability,” according to the filing.
The Canadian unit isn’t profitable on a standalone basis, and has suffered significant net losses for the nine months that ended Nov. 26, the filing said.
And cash constraints led to delays and stoppages of merchandise shipments to Bed Bath & Beyond’s Canada stores, causing inventory levels to decrease dramatically, according to the filing.
Economics ‘Not Justifiable’
“While consideration was given to closing a smaller subset of poorly performing stores, and continuing operations in Canada with a reduced footprint of stronger performing locations, the Bed Bath & Beyond Group has concluded that the economics of doing so are not justifiable,” according to the filing.
“Without an operation of scale, the costs of accessing inventory, securing necessary transportation arrangements, and maintaining operational infrastructure would significantly impact the profitability (if any) of these remaining Canadian locations,” it added.
As of Nov. 26, Bed Bath & Beyond’s banner stores in Canada had total assets of roughly $427.4 million, and total liabilities of about $342.8 million, according to the filing. The Buy Buy Baby chain in Canada had total assets of $52.7 million and total liabilities of $86.9 million.
Saying that Bed Bath & Beyond in Canada is insolvent, the retailer in its filing added that it is looking to undertake a “liquidation of its remaining inventory with assistance from a third-party professional liquidator and vacate its leased retail stores and premises.”
On behalf of the retailer, investment bank Lazard Frères & Co. contacted two potential strategic partners with respect to the Canada-only operations.
“One additional third-party independently contacted Lazard about the Canadian business,” the filing said. “No bids have been received that would provide value in excess of the estimated liquidation value of [Bed Bath & Beyond’s] Canada’s inventory.”