New York(CNN) Bed Bath & Beyond, the store for seemingly everything in your home during the 1990s and 2000s, filed for bankruptcy on Sunday.
“Thank you to all of our loyal customers. We have made the difficult decision to begin winding down our operations,” a statement at the top of the company’s website said Sunday morning.
The company’s 360 Bed Bath & Beyond locations, along with its 120 buybuy BABY stores, will remain open for now, as will websites. The company secured a $240 million loan to help fund its operations during bankruptcy.
But store closing sales will begin Wednesday, and Bed Bath & Beyond will close some stores. Just how many — or what happens to its 14,000 employees –depends on what happens next.
A bankruptcy filing does not necessarily mean that a company is going out of business. Many major US companies have filed for bankruptcy, using it to shed debt and other costs they could no longer afford. But even if Bed Bath and Beyond does emerge from bankruptcy, its future is not guaranteed.
The company said it would seek to sell some or all of its business. If it’s able to find a buyer, Bed Bath & Beyond will halt store closings. But if a buyer doesn’t come forward, Bed Bath & Beyond will likely be liquidated entirely and go out of business.
It’s also possible the company could emerge from bankruptcy as an online-only retailer, said Neil Saunders, an analyst at GlobalData Retail.
“Ultimately, if it emerges from bankruptcy at all, Bed Bath & Beyond will be a shadow of its former self,” he said.
Bed Bath & Beyond had been a crown jewel of the era of so-called “category killers” — chains that dominated a category of retail, such as Toys “R” Us, Circuit City and Sports Authority. Those companies, too, ultimately filed for bankruptcy as shoppers turned away from huge specialty stores in favor of online options like Amazon.
Bed Bath & Beyond became known for pots and pans, towels and bedding stacked from the floor to the ceiling at its cavernous stores — and for its ubiquitous 20%-off coupons. The blue-and-white coupons became something of a pop culture symbol, and millions of Americans wound up stashing them away in their cars, closets and basements.
The company said customers will have Sunday, Monday and Tuesday to use their remaining 20%-off coupons. The company will stop accepting them Wednesday. Instead, Bed Bath & Beyond expects to offer “deep discounts” on its products as part of its going-out-of-business sales.
The retailer attracted a broad range of customers by selling name brands at cut-rate prices. Brands coveted a spot on Bed Bath & Beyond’s shelves, knowing it would lead to big sales. Plus, the open-store layout encouraged impulse buying: Shoppers would come in to buy new dishes and walk out with pillows, towels and other items.
Stores were a fixture for shoppers around the winter holidays and during the back-to-school and college seasons, and Bed Bath & Beyond also had a strong baby and wedding registry business.
But the New Jersey-based company has been slow to respond to shopping changes and struggled to entice customers who had moved on to Amazon, Target and other chains.
In its bankruptcy filing, Bed Bath & Beyond said it had $5.2 billion in debt and assets of just $4.4 billion. It secured $240 million in financing Sunday to stay afloat just long enough to close its stores and wind down its operations.
The company encouraged shoppers to seek out its discounted merchandise later this week. Items purchased before Wednesday can be returned until May 24, but all sales after Wednesday will be final. The store will stop accepting gift cards on May 8.
Founded in 1971 by Warren Eisenberg and Leonard Feinstein, two veterans of the discount retail industry in Springfield, New Jersey, the chain of small linen and bath stores — then called Bed ‘n Bath — first grew around the northeast and in California selling designer bedding, a new trend at the time. Unlike department stores, it didn’t rely on sales events to draw in customers.
The company changed its name to Bed Bath & Beyond in 1987 to reflect its expanded merchandise and bigger “superstores.” The company went public in 1992 with 38 stores and around $200 million in sales.
“We had witnessed the department store shakeout and knew that specialty stores were going to be the next wave of retailing,” Feinstein said in 1993. “It was the beginning of the designer approach to linens and housewares and we saw a real window of opportunity.”
By 2000, those figures leapt to 241 stores and $1.1 billion in annual sales. The 1,000th Bed Bath & Beyond store opened in 2009, when the chain had reached $7.8 billion in annual sales.
The company was something of an iconoclast. It spent little on advertising, relying instead on print coupons distributed in weekly newspapers to attract customers.
“Why not just tell the customer that we’ll give you a discount on the item you want — and not the one that we want to put on sale? We’ll mail a coupon, and it will be a lot cheaper,” Eisenberg said in a 2020 New York Times interview.
The chain was known for giving autonomy to store managers to decide which products to stock, allowing them to customize their individual stores, and for shipping products directly to stores instead of a central warehouse.
The rise of online shopping
But as brick-and-mortar began to give way to e-commerce, Bed Bath & Beyond was slow to make the transition — a misstep compounded by the fact that home decor is one of the most commonly bought categories online.
“We missed the boat on the internet,” Eisenberg said in a recent Wall Street Journal interview. (The co-founders are no longer involved with the company.)
Online shopping weakened the allure of Bed Bath & Beyond’s fan-favorite coupons, too, because consumers could find plenty of cheaper alternatives on Amazon or browse a wider selection on sites like Wayfair (W).
It wasn’t just Amazon and online shopping that sank Bed Bath & Beyond, however.
Walmart (WMT), Target (TGT) and Costco (COST) have grown over the past decade, and they have been able to draw Bed Bath & Beyond customers with lower prices and a wider array of merchandise. Discount chains such as HomeGoods and TJ Maxx have also undercut Bed Bath & Beyond’s prices.
Without the differentiators of the lowest prices or widest selection, Bed Bath & Beyond’s sales stagnated from 2012 to 2019.
Then the pandemic hit in 2020. The company temporarily closed all of its stores while rivals deemed “essential retailers” like Walmart remained open. Sales sank 17% in 2020 and 15% in 2021.
What’s more, Bed Bath & Beyond has rotated through several different executives and turnaround strategies in recent years.
Former Target executive Mark Tritton took the helm in 2019 with backing from investors and a bold new strategy. He scaled back coupons and inventory from national brands in favor of Bed Bath & Beyond’s own private-label brands.
But this change alienated customers who were loyal to big brands. The company also fell behind on payments to vendors, and stores did not have enough merchandise to stock shelves. Tritton stepped down as CEO in 2022.
Scramble to avoid bankruptcy
Bed Bath & Beyond (BBBY)has been teetering on the brink of bankruptcy for months.
In February, it was able to stave off bankruptcy by completing a complex stock offering that gave it both an immediate injection of cash and a pledge for more funding in the future to pay down its debt. That offering was backed by private equity group Hudson Bay Capital.
But Bed Bath & Beyond last month said it terminated the deal with Hudson Bay Capital for future funding and was turning to the public market to try to raise funds.
The company has also been shrinking to save money. It said earlier this year it would close around 400 locations, but would keep open profitable stores in key markets.
And the company tried to save money by not paying severance to some laid-off workers at closing stores.
Bed Bath & Beyond laid off 1,295 workers in New Jersey this month, just days before a new state law kicked in that mandates severance pay — equal to one week of pay for each year of employment — for workers who lose their job.
All these moves were not enough to keep the once-dominant chain out of bankruptcy, however.
And Bed Bath & Beyond is the latest retail chain to file for bankruptcy this year. Bankruptcies are piling up in the retail sector as interest rates go up and discretionary spending slows down.
David’s Bridal, Party City, Tuesday Morning, mattress manufacturer Serta Simmons and Independent Pet Partners, a pet store retailer, have filed for bankruptcy in recent weeks.