The growth of online sales has steadily driven numerous brick-and-mortar retailers out of business or into bankruptcy. As a New Jersey firm focused on bankruptcy law, we pay careful attention when large companies based in our state face these difficulties. The bankruptcy and liquidation of New Jersey-based retailer Bed Bath & Beyond is a case that we have been monitoring.
Why did Bed Bath & Beyond file for bankruptcy? Their issues might have started with the growth of online retailers, but several questionable decisions likely pushed them into liquidation.
Slumping Sales and the Pandemic
While there are many factors that came together to force Bed Bath & Beyond into bankruptcy, falling sales and a sudden cash crunch were major issues. Their decline in sales occurred gradually, but the beginning can be pinpointed to the COVID-19 pandemic.
In the early days of the pandemic, Bed Bath & Beyond stores were temporarily closed across the country. At the same time, major competitors like Wal-Mart were considered “essential,” allowing them to stay open during that time. According to CNN, BB&B’s sales dipped 17% and 15% in 2020 and 2021, respectively.
The pandemic only worsened the challenges that retailers everywhere had been facing for years thanks to e-commerce competitors like Amazon. Bed Bath & Beyond built their customer base on a large selection of bedding and kitchenware with distinct 20%-off blue coupons. For years, sites like Amazon offered those same goods for less, and they delivered directly to your door.
Attempting to Avoid Bankruptcy
Bed Bad & Beyond scrambled to right the financial ship well before the damage from the pandemic was done. In 2019, the company hired Mark Tritton—an executive with Target—as its new CEO.
Tritton’s approach involved aggressive cost-cutting measures. He started by scaling back the famous blue coupons that were a large part of the company’s brand, but the larger issue involved inventory changes.
Starting immediately, Tritton began replacing popular national brands on the company’s shelves with their own private-label products. The profit margins on these products are much higher, and the hope was this move would save costs.
Unfortunately, it did the opposite. Buyers that were loyal to these large national brands took their business elsewhere. For many, it likely pushed some of the more loyal customers into the arms of online retailers like Amazon.
Further complicating these issues was a severe lack of cash. Without liquid assets, the company was unable to purchase inventory, leaving many store shelves empty during crucial sales periods. The inability to keep merchandise on the shelf was partially to blame for the further drop in sales.
Filing for Chapter 11 Bankruptcy
On April 23, 2023, Bed Bath & Beyond filed for protection under Chapter 11 of the bankruptcy code. This process began in earnest after a months-long effort to obtain additional funding to remain in business failed.
The filing—made in a federal court in New Jersey—painted a bleak picture of the company’s outlook. Bed Bath & Beyond listed their assets at approximately $1 billion, but their liabilities were closer to $10 billion.
At the time of the filing, the company announced that they had secured funding that would allow them to sell off some or all their assets. This liquidation would eventually result in the closure of all retail stores.
Talk to an Attorney About Bankruptcy Protections
The reasons why Bed Bath & Beyond filed for bankruptcy could provide important lessons for your own business. If you believe a plan of reorganization is necessary, now is the time to reach out to a dedicated bankruptcy attorney from Gillman, Bruton & Capone. We can also work with creditors to help them file a Proof of Claims at the same time that a business enter bankruptcy.