Bed Bath & Beyond Puts Its Money Where its Orders Are…Upfront

Bed Bath & Beyond, desperately trying to win back the trust – and credit – of its suppliers, told them this afternoon it will immediately begin paying for all new orders in advance.

It will also “gradually” convert its payment terms to net pricing, eliminating surcharges and chargebacks like damage allowances. And it will now pay its drop-ship suppliers, who ship orders directly to consumers and had been paid 30 days later, within seven days.

These significant changes in the retailer’s payment terms were announced during two back-to-back online sessions with selected vendors on Thursday afternoon in presentations from CEO Sue Gove, interim CFO Holly Etlin and the brand managers for its Bed Bath & Beyond and BuyBuy Baby brands, which are now its remaining nameplates. The information from the calls was relayed to Warrensreport from several suppliers who watched.

The hard-core facts about the new payment arrangements were accompanied by more general presentations on the retailer’s plans going forward for merchandising, marketing and inventory management. Gove talked about a new “Supplier Promise” that would “simplify” current ordering processes.

What was not addressed, however, were any details on when current outstanding invoices would be paid. Company executives have said some of the funds generated through last week’s stock sale, which resulted in about $225 million for the company, was being set aside for accounts payable but there was no timetable. Most of it went to debt service but Gove said on the call some was going to be used for new orders.

Payment in advance is an unusual tactic in retailing but has been used in certain cases where vendors have been hesitant to ship without money up front. BBB said this policy would be in effect for several months until it regained the trust of its suppliers.

Etlin said the remaining money that was being raised through the investment by Hudson Bay Capital Management, as much as $775 million, would be made available to Bed Bath at a rate of $100 million a month starting on March 1.

The other message to the suppliers was to be patient. “This is going to take some time,” is how Gove said it, while Etlin said the new payment terms meant vendors would have “no further credit risks for the next few months as we clean up our act.”