Bed Bath & Beyond Announces Changes, But 'Fundamentals Remain Challenged'

© Reuters Bed Bath & Beyond (BBBY) Announces Changes, But 'Fundamentals Remain Challenged'

By Sam Boughedda

On Wednesday, Bed Bath & Beyond (NASDAQ:BBBY) announced a strategic change to drive growth and profitability and improve its balance sheet and cash flows.

The struggling company, which has been the focus of meme traders over the last few weeks, said they are embracing a straightforward, back-to-basics philosophy that focuses on better serving customers, driving growth, and delivering business returns.

It announced several measures, including job cuts, store closures, and a stock offering, in an attempt to turn its fortunes.

The retailer also stated that same-store sales would decline by a larger-than-anticipated 26% in the second quarter and that it would keep the buybuy Baby division, which it had previously put up for sale. Comparable-store sales are expected to decline 20% this year as it works through its transformation.

In addition, Bed Bath & Beyond explained it will shut 150 underperforming stores, exit a third of its nine owned brands, and reduce stocks in the remaining six brands to 20% of its total inventory.

Furthermore, BBBY will reduce its workforce, including approximately 20% across the corporate and supply chain.

Regarding liquidity, BBBY said it has secured financing commitments for more than $500 million of new financing.

"We are working swiftly and diligently to strengthen our liquidity and secure our path for the future. We have taken a thorough look at our business, and today, we are announcing immediate actions aimed to increase customer engagement, drive traffic, and recapture market share," stated Sue Gove, Director and Interim Chief Executive Officer at BBBY.

Following the news, a KeyBanc Capital Markets analyst released a note arguing that there are "no silver bullets," and the fundamentals are challenged.

"Fundamentals remain challenged (comps -26% in 2Q vs. the consensus of -21%)," wrote the analyst. "BBBY is working to enhance liquidity and reduce costs, through a new ABL facility, a shelf filing, and headcount and store reductions. While management is working diligently to improve the business, we remain Underweight and reiterate our $2 price target given the challenges ahead and competitive industry backdrop."

Bed Bath and Beyond shares are down more than 22% at the time of writing.