BBBY Stock (NASDAQ:BBBY)
Bed Bath & Beyond announced on Wednesday that it had reached a $120 million agreement to help get products back on its shelves as it skirts the possibility of declaring bankruptcy.
To increase inventory at the struggling retailer’s stores, ReStore Capital, an investment manager that offers “creative financing solutions” to the retail sector, will purchase up to $120 million worth of goods from Bed Bath’s (NASDAQ:BBBY) major suppliers.
CEO Sue Gove stated in a news release that “our new vendor consignment program enables us to increase our inventory position in top items that customers are buying and improve the customer experience.” “With this low-cost solution, we can increase the availability of goods and better meet customer demand.”
Since its vendors tightened their credit conditions, reduced credit limits, and demanded prepayments before agreeing to fulfill orders, Bed Bath has struggled to stock its shelves, the business has previously said.
“With the help of our new vendor consignment program, we can better serve our clients by increasing our inventory position in hot categories. We may be able to improve product availability and better meet demand with this capital-light alternative, according to Gove in a news release.
“We are taking the necessary steps to maintain our business now and to realize our true potential in the long run, for the benefit of all stakeholders.”
Bed Bath has “potential for sustainable improvement,” according to Gove, who acknowledged the company’s major suppliers’ backing.
The performance and value of our business as it is right now, according to Gove, “are not indicative of our full potential.” “Expanding and accelerating improvement is our entire organization’s top priority.”
Bed Bath has been making every attempt to avoid filing for bankruptcy after a string of poor quarters left the business in the red and with no cash flow.
The business released its preliminary fiscal fourth-quarter numbers last week. It reported net sales of approximately $1.2 billion and a 40% to 50% decline in comparable store sales. Despite noting that its free cash flow has not been exhausted, Bed Bath reported negative operating losses had continued.
For the fourth quarter of its fiscal year in 2021, the corporation reported revenues of $2.05 billion.
It announced what was previously thought to be a Hail Mary stock offering in February with the intention of injecting more than $1 billion in equity into the business, but it only succeeded in raising $360 million, according to the firm.
On Wednesday, BBBY stock dropped 4% to 34 cents. The stock has fallen into the category of penny stocks after losing 86% of its value this year.
According to earlier statements from the company, Bed Bath has struggled to keep shelves supplied over the past two quarters as vendors fearing a possible bankruptcy filing have required upfront payments and reduced credit limits. Suppliers often reduce shipments to retailers in advance of bankruptcy since they don’t always get reimbursed when businesses declare bankruptcy.
With the agreement with ReStore Capital, suppliers will have more assurance that this won’t be the case. ReStore will regularly make scheduled purchases from vendors, according to Bed Bath.
Restoring vendor connections is a key component of the company’s turnaround plan, which is now being implemented to revamp its operations. Gove estimated that Bed Bath & Beyond’s inventory levels were in the 70% area in January. Gove claimed on Wednesday that the company’s main suppliers were backing its initiatives.
This is Bed Bath’s most recent financial scheme in an effort to stay out of bankruptcy. After canceling a prior share offering that raised more than $1 billion in funding, the business announced last week that it planned to sell up to $300 million worth of stock. According to a form submitted to the Securities and Exchange Commission, Bed Bath anticipates having no choice but to declare bankruptcy if the present equity bid fails.
The $120 million transaction with Bed Bath & Beyond may be a lifeline for the faltering business, but it is unlikely to address all of its issues. Bed Bath & Beyond will need to adjust as the retail sector develops and come up with fresh approaches to attract customers. It remains to be seen if it will be able to accomplish this.
Featured Image: Megapixl
