Bed Bath & Beyond buys billions of dollars’ worth of home merchandise every year and to the vendors who make and sell those goods the retailer represents a substantial portion of their business.
Right now, it’s a good news/bad news situation for these suppliers of housewares, small appliances, home textiles and home décor products: there’s business to be had but it is treacherous territory. BBB has struggled the past several years, none so much as the last few months when it fired its CEO and chief merchant, went into cash flow meltdown and saw both its top and bottom lines turn to mush. The mention of the word bankruptcy has gone from never-happen to hushed conversations to outright headlines in the press and amongst financial types.
Later this week Bed Bath’s interim CEO and its latest team of merchants and finance officers are scheduled to hold a vendors summit, virtually, with its key suppliers. The retailer has not officially announced this and it’s unknown how many of its suppliers will be involved nor what the company intends to tell them.
Suppliers, contacted by Warrensreport, didn’t want to speak on the record about the session or what they expected to happen but clearly the level of concern about the ongoing viability of Bed Bath was at the top of their list. Some suppliers confirmed they are being paid regularly and on time by BBB, while others said they have had to vehemently request payments if they were expected to continue shipping goods.
Vendors ran a virtual telephone, text, email and zoom round robin last week, each trying to compare notes and find out how their counterparts were both being treated and what they were doing as a result. Many reported mid and high-level meetings with Bed Bath executives to discuss payments, shipments and future deliveries going into 2023.
For BBB, keeping its suppliers onboard is as important – maybe more so – than buy-ins from bankers, lenders and investors. If its vendors sense they are not going to get paid because of an imminent bankruptcy they will quickly stop shipping new merchandise and that will become a self-fulfilling prophecy: a retailer with nothing on its shelves is dead in the water – especially during the critical holiday selling season just getting ready to start. This has been the kiss of death for other retailers who eventually ended up going out of business without vendor support.
Bed Bath executives executed a refinancing of the company’s debt last week that appears to give it more financial breathing space to start to generate cash to address those loans. The refi comes with higher rates and terms that essentially mortgage the assets of Bed Bath for the life of the loans. Asset-based loans are often the resource of last resort for struggling retailers and again, have often led to insolvency.
Company executives said they were confident these new arrangements were what was needed to provide for a return to profitability and better business operations. If they had said anything else, one would have been shocked.
Wall Street still seems to be hanging in there when it comes to BBB stock even as analysts and ratings services have downgraded the company. Its share price is low but has not plummeted as could be expected if investors thought the end was imminent.
That said, the rumor mill is in overdrive within the supplier community and vendors are generally spooked about what happens next. Compare Bed Bath’s situation to that of a patient in intensive care: it is hooked up to all the right machinery – financial rather than medical – but the prognosis is anything but certain.
The patient remains in critical condition.
WarrensReport 