For Bed Bath & Beyond, bankruptcy may be only option

In its prime, Bed Bath & Beyond stacked its aisles high and wide with linens, kitchen wares and as-seen-on-TV gadgets. It was the homebody’s happy place, with 20 percent-off coupons always within reach.

But now, the Union, N.J. based chain is on a precipice, as a slow, years-long decline metastasizes within a haze of strategic missteps, bad investments, patchy inventory and indifferent shoppers. Executives warn that bankruptcy might be unavoidable, although many experts wonder whether the 52-year-old retailer will survive at all.

Bed Bath & Beyond posted a worse-than-expected $393 million loss in the third quarter ended Nov. 26 - pushing its losses in the fiscal year to date above $1.1 billion. Sales tumbled 33 percent from the same three-month period last year.

“What we’re seeing is a tumultuous situation, and it really has been a long time in the making,” said Neil Saunders, the managing director of the analytics company Global Data. There has been a “gentle erosion of customers . . . year in, year out.”

In an earnings call Jan. 10, chief executive Sue Gove said the company is working with a team of advisers as it looks to slash its costs by $80 million to $100 million. It is proceeding with plans announced in August to close 150 stores and has said an undisclosed number of layoffs is underway.

“I don’t think that’s going to be enough to rebalance the book, because the losses are just terrible, and they’re still in these dire straits,” Saunders said.

Gove did not say a Chapter 11 filing — which allows troubled companies to save themselves through a reorganization of their debt - was definite. On Friday, a company spokesperson said in a statement to The Washington Post that “multiple paths are being explored and we are determining our next steps thoroughly, and in a timely manner.”

But a public acknowledgment generally means there’s no turning back, said Patrick Collins, a partner at the New York-based law firm Farrell Fritz who concentrates on bankruptcy and corporate restructuring.

“It becomes inevitable,” Collins said. “Because if you’re a supplier and you hear that, you’re no longer going to extend credit to Bed Bath & Beyond — you’re going to insist on c.o.d.”

If there is to be a bankruptcy filing, Mark Cohen, the director of retail studies at Columbia University, expects it to happen soon. Most companies file in January because they have not paid their vendors and have fresh cash from holiday sales that can be used to pay legal fees in the bankruptcy proceedings.

Cohen added there is an even chance of the company’s heading straight to liquidation through a Chapter 7 filing.

“Absent a suitor who either buys the company or injects the company with some form of very visible cash, or gets involved in the company’s debts and takes it into a prepackaged bankruptcy — the company is toast,” Cohen said.