The corporate chessboard of the post-pandemic world continues to move with high inflation, monetary tightening and the risk of recession in rich countries. This Sunday (23), the US home appliance retailer Bed Bath & Beyond Filed in the U.S. State Court of New Jersey for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code (Chapter 11).
With a history of more than 50 years, the company specializes in the sale of products such as bed, table and bath products, emerged as the winner of the 2008 crisis, and since then it has expanded while its competitors went bankrupt.
However, it has not been able to withstand the post-pandemic economic slowdown, and its business strategy has some flaws.
There were already fears of bankruptcy for Bed Bath & Beyond, which closed stores, made layoffs, defaulted on debt and announced plans to raise funds through a stock offering earlier this year. The Canadian division was already considered insolvent.
In the past 12 months, its shares, which trade on the Nasdaq under the ticker BBBY, have fallen 98% and are now trading at cents. In 2022, stocks entered the speculative bubble of GameStop-like “meme stocks.”
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The retailer tried to reverse its failed investment strategy in private-label products, which dampened its demand. Before that, in 2020, the company was already suffering from delayed online operations and problems in its supply chain due to the Covid-19 pandemic.
Low interest rates and consumption stimulus provided by the US government during the pandemic still mask the company’s problems, but they became more apparent after the onset of the most recent monetary tightening.
Now, as consumers concentrate their purchases on the products they need most, the weaknesses of retailers including Bed Bath & Beyond have become more apparent — and credit is less sustainable.
Global investors are worried about the possibility of a recession in the land of Uncle Sam, as companies cannot afford high interest rates for long. The United States has already seen the impact on mid-sized banks, and now experts believe it’s the turn of retailers.
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Check out this week’s episode of A Dinheirista, where reporter Julia Wiltgen tackles this and many other cases involving money. Check:
Beyond Bed Bath & Bankruptcy Protection
Protection against bankruptcy under Chapter 11 is a process similar to judicial recovery, here in Brazil, that indicates the need for a restructuring plan and allows the debtor company to continue operating and receiving credit.
To implement the restructuring plan, Bed Bath & Beyond secured a $240 million line of credit from investment firm Sixth Street Specialty Lending, which the retailer believes is sufficient to maintain its cash flow.
Its stores and websites will continue to operate while the company seeks interested buyers for its assets. Stores are expected to close, but the company did not specify how many.
Five years ago, the company had more than 1,500 stores across North America, but today that number is no more than 480 — still employing 30,000 people. The truth is, even under the best of circumstances, Bed Bath & Beyond needs to complete the process with very little activity.
*With Reuters and The New York Times
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