Shares of Bed Bath & Beyond (NASDAQ:BBBY) are plunging lower after the company announced its highly anticipated strategic update. First, the retailer will lay off about 20% of its corporate staff and shut down 150 “lower-producing” stores out of 955 total in an attempt to boost its cash. As a result, guidance for full-year capital expenditure was also reduced from $400 million to $250 million. BBBY stock has fallen by more than 20%.
As expected, Bed Bath announced that it had received a $375 million first-in-last-out (FILO) loan from Sixth Street Partners. It also expanded its asset-backed revolving credit facility to $1.13 billion. In total, the company added on more than $500 million of new financing.
In a news release, interim CEO Sue Gove explained:
“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.”
BBBY Stock Plunges After Strategic Update
There’s another factor sending shares of BBBY lower. The company announced it is preparing to offer a 12 million share at-the-market (ATM) offering, which would represent about 15% of shares currently outstanding. This would have the effect of diluting existing shareholders, but would add much-needed cash to Bed Bath’s balance sheet.
Furthermore, leadership changes were announced. The roles of COO John Hartmann and Chief Stores Officer Gregg Melnick will be eliminated. Meanwhile, Chief Merchandising Officer Mara Sirhal was appointed brand president of Bed, Bath & Beyond, while Patty Wu was appointed brand president of Buybuy Baby.
The company’s board has determined not to sell Buybuy Baby after previously hiring advisors to explore a sale. However, it plans on discontinuing about a third of its owned brands, including Haven and Wild Sage. For the remaining owned brands, such as Simply Essential and Squared Away, Bed, Bath & Beyond will reduce the “breadth and depth” by about 20%.
The company provided a snapshot of current-quarter financials. Net sales are expected to be $1.45 billion, compared with the estimate of $1.52 billion. On top of that, same-store sales are expected to decline by 26% year-over-year, more than the estimate for a decline of 20.7%.
Finally, Bed Bath has confirmed that it will report second-quarter results on Sept. 29.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
