Bed bath and beyond warned on Thursday that he was running out of money and was considering going bankrupt.
The retailer, citing worse-than-expected sales, issued a ‘continuity’ warning saying that over the next few months it is unlikely to have the cash to cover expenses, such as leases or payments to suppliers. The company said it was exploring financial options in addition to possible bankruptcy.
Shares of the company fell 23% in early trading after Bed Bath released the updates in a pair of financial files.
Among its challenges, Bed Bath said it was struggling to get enough merchandise to fill its shelves and was attracting fewer customers to its stores and website.
The retailer also said that it was unable to refinance part of its debt, less than a month after inform investors that he plans to borrow more to redeem tranches of existing bonds.
Bed Bath’s indebtedness weighs on the company. The retailer has nearly $1.2 billion in unsecured notes, with maturity dates spread across 2024, 2034 and 2044. In recent quarters, Bed Bath has warned it is burning through cash fast .
Bed Bath notes are all trading below par, a sign of financial distress.
Bed Bath has gone through a particularly tumultuous time, with the departure of its CEO and other senior executives, company-wide layoffs, store closures and an overhaul of its merchandise strategy. As sales dwindled, its CEO Mark Tritton was forced out in June. Sue Gove, who stepped in as interim CEO, assumed the role permanently.
She presented a return strategy at the end of August. As part of the plan, she said the company would reduce costs by reducing its store footprint and its workforce. She said it would add more items from popular national brands, as it moved away from an aggressive private label strategy. And she said she secured more than $500 million in new funding to help stabilize the business.
The company said in its last earnings report that it believes it has enough cash to move forward.
In a statement released Thursday, Gove said recent sales results illustrate why a turnaround plan is so important.
“Transforming an organization of our size and scale takes time, and we expect each quarter to come will build on our progress,” she said.
So far, Bed Bath hasn’t seen any change in sales trends. Net sales during the third fiscal quarter, which ended in November. 26, are expected to be around $1.26 billion — a sharp drop from $1.88 billion a year ago, the company said.
It forecast a net loss of about $385.8 million for the third quarter, a nearly 40% increase in year-over-year losses. The quarterly losses include an impairment charge of approximately $100 million, which was not specified.
The company will release its full quarterly results and hold an earnings call on Tuesday.
Signs of Bed Bath’s financial stress also appeared on store shelves. Because the retailer has less cash, some vendors are unwilling to ship large amounts of merchandise—or in some cases, any merchandise—to the business.
Gove said in a press release that lower credit limits mean customers see empty shelves and less variety than they realize. She said the company uses money earned during the holiday season to pay suppliers and order more inventory.
“We saw trends improving as inventory levels increased,” she said.
Bed Bath a already had a history of strained relationships with key national brands, such as Dyson, Keurig and Cuisinart. In previous holiday seasons, Bed Bath did not have popular gift items, such as stand mixers from KitchenAid. Meanwhile, these items were plentiful at competitors like target.
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