All eyes are on Bed Bath & Beyond (NASDAQ:BBBY) after the retailer announced over the weekend that it had voluntarily filed for Chapter 11 bankruptcy protection. On top of that, Sixth Street Specialty Lending has agreed to provide the company with $240 million in debtor-in-possession (DIP) financing to help support it during the process. Shares of BBBY stock are currently down more than 3o%.
CEO Sue Gove said the following about the bankruptcy news:
“We deeply appreciate our associates, customers, partners, and the communities we serve, and we remain steadfastly determined to serve them throughout this process. We will continue working diligently to maximize value for the benefit of all stakeholders.”
Bed Bath & Beyond’s 360 stores and 120 buybuy BABY stores will remain open for the time being, although Bed Bath has said it will begin efforts to close its retail locations. In addition, the company will “conduct a limited sale and marketing process for some or all of its assets,” which will include the Bed Bath and buybuy BABY brands. If the sale is successful, the company will “pivot away” from closing down stores.
5 Stocks That Will Benefit From Bed Bath & Beyond’s Bankruptcy
According to court filings, Bed Bath has between 25,001 and 50,000 creditors. BNY Mellon (NYSE:BK) is the largest creditor, with the company owing the bank $1.18 billion. As of November, Bed Bath had $4.4 billion in assets and $5.2 billion of debt.
The possible closure of Bed Bath stores will undoubtedly affect the shopping habits of many consumers. At the same time, other retailers will benefit from the company’s bankruptcy filing.
“We believe that we are entering a new phase of retail industry consolidation and that Target and Walmart will be long-term share beneficiaries,” said Piper Sandler analyst Edward Yruma. In addition to Target (NYSE:TGT) and Walmart (NYSE:WMT), Yruma also believes that e-commerce retailer Amazon (NASDAQ:AMZN) will benefit.
Bank of America analysts agree, also noting that Overstock (NASDAQ:OSTK) and Wayfair (NYSE:W) will benefit from the bankruptcy:
“We estimate that for every 5% of Bed Bath & Beyond revenue (not including Buy Buy Baby), Wayfair revenue would increase 2% with high adjusted EBITDA flowthrough (we estimate low-to-mid tens of millions).”
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On the date of publication, Eddie Pan held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
