Bed Bath & Beyond
shares fell on Wednesday after the troubled retailer said it had secured commitments for more than $500 million in new financing and was cutting 20% of its workforce. It also said it would close about 150 stores.
The new financing includes a new enhanced US$1.13 billion asset-backed revolving credit facility and a new US$375 million first-in, last-out facility. The $500 million loan came from JP Morgan and Sixth Street Partners.
In an effort to cut costs, the company plans to reduce its workforce by 20% in corporate and supply chain operations. Bed bath (ticker:
) will also close approximately 150 lower-production stores and exit a third of the brands it owns.
Executives expect cost-cutting strategies to reduce selling, general and administrative expenses by about $250 million in fiscal 2022. Capital spending will reach $250 million for 2022, down from the previously disclosed $400 million .
The company also provided a long-awaited update to its strategic review of its Buybuy Baby business, determining that the vertical will deliver greater shareholder value as part of a portfolio rather than as a stand-alone company. The board of directors has identified several strategies to unlock the brand’s full growth potential, including building non-digital platforms and expanding products and services.
“We are working quickly and diligently to strengthen our liquidity and secure our path for the future,” said Sue Gove, interim chief executive. “We’ve taken a deep look at our business and today we’re announcing immediate actions aimed at increasing customer engagement, driving traffic and regaining market share.”
Gove has been acting chief executive since late June when former boss Mark Tritton stepped down. On Wednesday, the board said Gove would continue to lead the company while the search process for a chief executive continued.
Shares fell 25% to $9.15 in premarket trading on Wednesday. Bed Bath will provide additional business updates on a conference call held at 8:15 a.m. ET on Wednesday.
The loan will allow Bed Bath & Beyond to strengthen its balance sheet and buy the company time to implement a much-needed turnaround plan. The funding comes after Bed Bath burned through more than $300 million in cash in its first fiscal quarter.
Reports of the Bed Bath loan have been circulating since last week, boosting the stock price. Since markets closed on August 24 – the date of the first loan report – shares have jumped nearly 40%.
In addition to the strategic update, Bed Bath announced Wednesday that it is preparing a go-to-market program for up to 12 million common sharesand will use the proceeds from the sale for general corporate purposes, including paying down its debt, future share repurchases and financing acquisitions.
The retailer also updated its guidance for the second quarter. The company expected net sales of about $1.45 billion, below estimates of $1.52 billion, with comparable sales down 26% from the same quarter last year. For fiscal 2022, Bed Bath expects comparable sales to decline in the 20% range. The company’s second quarter earnings report is scheduled for September 29.
Write to Sabrina Escobar at [email protected]