Is Bed Bath & Beyond (BBBY) dying?

The retail apocalypse is killing another iconic American retailer, Bed Bath & Beyond (BBBY).

Bed Bath & Beyond is closing 150 stores and eliminating 20% of its corporate and supply chain staff, Business Insider reports. Statista estimates Bed Bath and Beyond operated 953 stores in July 2022. Hence, the latest closings, announced on 16 September 2022, will reduce Bed Bath and Beyond’s footprint to 803 stores.

Bed Bath & Beyond (NASDAQ: BBBY) has been shrinking for a while. Statista estimates its store count fell from 1,553 in 2019 to 1,500 in 2020, to 1,020 in 2021 to 953 in July 2022. Hence, Bed Bad & Beyond lost 600 stores in the last three years.

The Incredibly Shrinking Bed Bath & Beyond

Moreover, the shrinkage will grow to 750 stores, or close to half of the company’s 2019 store count, in less than four years, if they close 150 locations. Thus, in 2024 Bed Bath & Beyond (BBBY) could be half the size it was in 2019, just five years before.

Mr. Market has noticed this shrinkage. Bed Bath & Beyond’s share price fell from $24.14 on 17 September 2021 to $7.60 on 20 September 2022. Hence, Bed Bath & Beyond lost over two-thirds of its share value in a year.

Similarly, Bed Bath & Beyond’s total assets fell from $6.053 billion on 31 May 2021 to $4.949 billion on 31 May 2022. Moreover, Bed Bath & Beyond’s cash and short-term investments shrank from $1.132 billion on 31 May 2021 to $108 million on 31 May 2022.

Is Bed Bath & Beyond in the Death Spiral?

Observes will wonder if Bed Bath & Beyond (BBBY) is entering the Retail Death Spiral. The Death Spiral occurs when a company runs out of cash and cannot finance its operations.

Notably, Bed Bath & Beyond’s quarterly operating income fell to -$383.55 million on 31 May 2022. The quarterly operating income fell from $286.04 million on 28 February 2022 and -$28.74 million on 31 May 2021.

Yet Bed Bath & Beyond had a $138 million positive cash flow on 31 May 2022. Unfortunately, that positive cash flow comes from borrowing. Bed Bath & Beyond reported a quarterly financing cash flow of $156.70 million on 31 May 2022. That means management borrowed $156.70 million to cover costs.

Comparatively, Bed Bath & Beyond’s total debt rose from $3.059 billion on 31 May 2021 to $3.072 billion on 28 February 2022 to $3.277 billion on 31 May 2022.

So yes, it appears Bed Bath & Beyond is in the death spiral.

How Much Money is Bed Bath & Beyond Losing?

Predictably, Bed Bath & Beyond (BBBY) loses money. It reported a quarterly operating loss of -$339.16 million on 31 May 2022.

The quarterly operating loss grew from -$164.48 million on 28 February 2022 and -$71.87 million on 31 May 2021. Moreover, Bed Bath & Beyond reported seven quarters of operating losses between November 2020 and May 2022. Bed Bath and Beyond has not made money since before the pandemic.

Similarly, Bed Bath & Beyond’s quarterly gross profit fell from $633.69 million on 31 May 2021 to $579.81 on 28 February 2022 to $349.31 million on 31 May 2022. In comparison, the quarterly revenues fell from $1.954 billion on 31 May 2021 to $1.463 billion on 31 May 2022. The quarterly revenues rose to $2.051 billion on 28 February 2022.

Frighteningly, Bed Bath & Beyond’s revenue growth fell by over 20% for four quarters in a row. The revenue growth fell by 26.16% in the quarter ending on 31 August 2021, 28.28% in the quarter ending on 11 November 2021, 21.68% in the quarter ending on 28 February 2022, and 25.10% in the quarter ending on 31 May 2022.

Thus, Bed Bath & Beyond’s revenues could fall so fast it could soon run out of money. Hence, the company enters the last stage of the Death Spiral in which cannot pay its creditors and suppliers. That could lead to bankruptcy and the company’s demise.

Bankruptcy can result when creditors go to court to collect unpaid bills. In a bankruptcy, a court can order a company reorganized, sold, or liquidated.

Is Inflation Killing Bed Bath & Beyond (BBBY)?

The cause of Bed, Bath & Beyond’s demise is a mystery because the retailer has been successful.

As a category killer, Bed Bath & Beyond has survived hard past times. Notably, Bed Bath & Beyond (BBBY) survived high inflation in the 1980s, and the 2007-2008 recession. Yet it is dying in what some politicians call a recovery.

To elaborate, a category killer is a deep-discounter that dominates one market. For example, Bed Bath & Beyond dominated home furnishings, kitchen utensils, bedding, and linens with low prices. Its stores were a fixture in many cities and Bed Bath & Beyond sent its legendary 20% off coupons to millions of mailboxes.

Yet, Bed Bath & Beyond is struggling in some rocky economic times. Notably, the US inflation rate rose from 5.39% in September 2021 to 8.26% in August 2022. High inflation helps category killers because it encourages shoppers to seek prices.

However, high inflation gives people less to spend on nonessentials such as new bath tools and bedding. Most people can live without a new set of sheets or towels. They cannot live without food, however.

The US food inflation rate rose to 11.4% in August 2022. Hence, food costs 11.4% more. As food prices rise, people cut back on other purchases, such as a new toaster from Bed Bath & Beyond.

Nor is it just food, US energy inflation is high. For example, the US energy inflation rate was 41.624% in June 2022, 32.928% in July 2022, and 23.813% in August 2022, Trading Economics reports. Thus food and gas prices are rising, forcing consumers to cut spending.

Who is Killing Bed Bath & Beyond (BBBY)?

So inflation is a suspect in Bed Bath & Beyond’s demise. Yet there are other suspects, including: Amazon (AMZN).

For example, Amazon’s share of the US home furnishings market could grow by 15.7% in 2022, Insider Intelligence forecasts. Amazon is stealing that share from other retailers such as Bed Bath & Beyond. Similarly, Amazon’s share of the health, personal care, and beauty segment could grow by 24.4% in 2022. Bed Bath & Beyond sells some health and beauty products.

Amazon hurt Bed Bath & Beyond because it kept operating during the COVID-19 pandemic while stores were closed. Hence, many normal Bed Bath & Beyond shoppers were ordering from Amazon. History shows many of those shoppers never return to brick and mortar.

Notably, Amazon targets Bed Bath & Beyond’s core customer base, the urban and suburban middle class. Amazon offers low prices and more convenient shopping. You can order items from your phone and have them delivered to your porch.

The end of Bed Bath & Beyond

I consider Amazon the biggest threat to Bed Bath & Beyond because of its size and popularity. For example, Tech Jury estimates there were around 153 million Amazon Prime Members in the USA in June 2022. Additionally, Tech Jury claims 60% of American households have Amazon Prime.

Other retailers that threaten Bed Bath & Beyond include Costco Wholesale (COST) and Walmart (WMT). Costco and Walmart sell the same stuff as Bed Bath & Beyond at lower prices.

Additionally, Walmart is growing presence in online retail. For example, DigitalCommerce360 estimates Walmart’s US online sales grew by 12% in the second quarter of 2022.

In that environment, I predict Bed Bath & Beyond (BBBY) will continue to lose money and shrink. My prediction, a hedge fund or a larger retailer will acquire Bed Bath & Beyond. An interesting buyer for Bed Bath & Beyond could be The TJX Companies (TJX).

TJX’s urban department stores make money with deep discounts. For example, TJX reported a quarterly operating income of $1.086 billion on 31 July 2022. I think TJX will want many Bed Bath & Beyond locations, but I don’t know if it wants the brand itself.

I think Bed Bed & Beyond could collapse. Smart investors need to stay away from this retailer because I think it could soon become a junk stock with no value.