(Reuters) -Bed Bath & Beyond Inc on Wednesday said it inked deals for more than $500 million in new financing and that it would close 150 stores, cut jobs and overhaul its merchandising strategy in an attempt to turn around its money-losing business.
Investors, however, remain concerned that the retailer's plan, announced in a strategic update, will do little to improve Bed Bath & Beyond's business as shares fell 25%. The retailer also announced a plan to raise money by issuing new shares.
The big-box chain - once considered a so-called "category killer" in home and bath goods - has seen its fortunes falter after an attempt to sell more of its own brand, or private label, goods. The COVID-19 pandemic, supply chain crunch and consumer pullback on shopping due to sky-high inflation also hit the chain's sales.
Bed Bath & Beyond forecast a bigger-than-expected 26% slump in same-store sales for the second quarter and said it would retain its buybuy Baby business, which it had put up for sale.
The efforts to sell buybuy Baby had been encouraged by GameStop Corp Chairman Ryan Cohen, the company's biggest investor until this month when he sold out of his 9.8% stake, sending shares plummeting.
Once known for providing many shoppers with 20%-off coupons, Bed Bath & Beyond revamped its merchandise in recent years to focus on private-label products including its Our Table brand cookware.
The chain is now ditching that strategy, nixing three of its private label brands, and reprioritizing national brands with labels including Calphalon, Ugg, Dyson and Cuisinart underpinning that strategy, executives said on a conference call.
Executives said Bed Bath & Beyond is cutting about 20% of its corporate and supply chain workforce, and eliminating its chief operating officer and chief stores officer roles. The company has about 32,000 employees.
Top brass tried to reassure analysts that vendors were still supporting the company, a key indication of its long-term financial prospects. Suppliers will ask for more money up front or stop shipping goods if they believe retailers can no longer pay them.
"As we have managed through our cash burn, we have seen changes in vendors we manage," said Chief Financial Officer Gustavo Arnal, adding that the company is managing the situation "one by one."
First-quarter sales plunged 25% and it lost $358 million, leading to the firing of its Chief Executive Officer Mark Tritton in June. The company hired Sue Gove, an independent board director, to replace him on an interim basis.
On Wednesday, Gove said the retailer was "continuing to see significant positive momentum" and intended to build its "deep heritage as a retailer."
"While there is much work ahead, our road map is clear and we're confident that the significant changes we've announced today will have a positive impact on our performance'" she said on a conference call.
The retailer also said it expanded an existing loan and received a new $375 million "first-in-last-out" loan, and would launch a stock offering of up to 12 million shares.
Arnal said that 50 to 60 stores will be closed in a "first wave" heading into the balance of Bed Bath & Beyond's fiscal year, which ends in February. The company has about 900 stores.
"They are running out of cash and desperately need to raise cash just to keep the business going," said Jim Dixon, equity sales trader at Mirabaud.
To improve its finances, the retailer said it would cut back on selling, general and administrative expenses by $250 million this year versus last year and rein in capital spending.
The company also estimates that comparable-store sales will drop 20% this year as it works through its transformation.
"We are broadly satisfied that the measures announced today ... will ease the pressure on the company, allowing it to continue trading," said Neil Saunders, GlobalData's managing director.
(Reporting by Uday Sampath and Deborah Sophia and Bansari Kamdar in Bengaluru; Additional reporting by Siddharth Cavale, Jessica DiNapoli and Arriana Mclymore in New York; Editing by Arun Koyyur and Jonathan Oatis)
