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If Bed Bath & Beyond closes, here's what could happen to its rivals

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A Bed Bath & Bust scenario could spell some short-term financial trouble for rival home furnishing retailers amid aggressive clearance sales across the country, an expert has warned.

“In the short term, liquidation [would be] a little hard on JC Penney, Kohl’s, Target, Walmart, Wayfair and maybe Container Store – and to some extent maybe Macy’s – because someone like [liquidator] Gordon Brothers will do a really aggressive sell-off,” retail expert Jan Rogers Kniffen told Yahoo Finance.

The potential for Bed Bath & Beyond (BBBY) to fail in 2023 looks high.

A person exits a Bed Bath & Beyond store in Manhattan, New York, USA, June 29, 2022. REUTERS/Andrew Kelly

A person exits a Bed Bath & Beyond store in Manhattan, New York, USA, June 29, 2022. REUTERS/Andrew Kelly

Bed Bath & Beyond said on Thursday that bankruptcy is on the table as it works to shore up its balance sheet after a disastrous holiday shopping season.

“The Company continues to consider all strategic alternatives, including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the Company’s business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the US Bankruptcy Code,” Bed Bath & Beyond said in a statement.

“These measures may not be successful,” the company added, noting that there are “substantial doubts” about its ability to continue as an “ongoing concern”.

In the fiscal third quarter ended Nov. 26, 2022, sales fell more than 30% to $1.259 billion from $1.878 billion in the year-ago quarter. The company said these numbers reflect “lower customer traffic and reduced levels of inventory availability, among other factors.”

Bed Bath & Beyond expects to post a net loss of $385.8 million for the quarter.

Meanwhile, the retailer’s stock was down nearly 30% in the Thursday session and another 22% on Friday, putting the shares at levels not seen since 1992.

Bankruptcy professionals are not ruling out the possibility of a Bed Bath & Beyond filing happening this month.

“I think it’s inevitable that they will shelve,” Macco CEO Drew McManigle said on Yahoo Finance Live. “I wouldn’t be surprised to see them file as early as this weekend. No reason not to. I suspect they’re working on their debtor in possession financing.”

When asked about the issue of bankruptcy, Bed Bath & Beyond spokeswoman Julie Strider told Yahoo Finance, “Since the inception of Bed Bath & Beyond Inc.’s comprehensive turnaround plan at the beginning of the third quarter, which financial actions to improve our balance sheet and cash flows, we have been working with strategic advisors to evaluate all avenues to regain market share and increase liquidity, our stated priorities. Such avenues may include restructuring or refinancing our debt, pursuing additional debt or equity, reduction or delay in the Company’s business activities and strategic initiatives, or sale of assets, other strategic transactions and/or other measures. No determination has been made at this time.”

Either way, Kniffen believes Bed Bath & Beyond’s rivals will quickly bounce back from any widespread deal-closure selling.

The reason for this, Kniffen explained, is because Bed Bath & Beyond has verged on irrelevancy in shoppers’ minds for years due to merchandise execution issues.

“Six months later, those same players will see some marginal gains in market share,” added Kniffen. “But this company has been losing market share for twenty years. I don’t see how there are really any noteworthy winners. It just can’t move the needle for anyone. Some of the share will also be shipped online to Amazon, of course.”

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