Bed Bath & Beyond (NASDAQ:BBBY) finally filed Chapter 11 bankruptcy and said it plans to liquidate. BBBY stock dropped overnight to 20 cents.
The company expects to have all its 360 namesake stores and 120 Buy Buy Baby stores closed by the end of June. Gift cards will expire on May 8, and $240 million has been borrowed from Sixth Street Specialty Lending to fund the wind-up.
The filing was not unexpected. BBBY management has been warning since January it may be unable to stay in business, filing a “going concern” notice.
BBBY Stock: The End
The chain’s failure to generate big sales during the Christmas quarter was the last nail in its coffin. Its subsequent attempts to raise cash and engineer a reverse stock split also failed.
However, small traders tried to pump up the stock along the way, betting against what was increasingly inevitable.
While some reporters claimed the company failed to reckon with online shopping, that’s not true. It brought in Mark Tritton from Target (NYSE:TGT) in 2019 to refocus the company on curated store brands. The Covid-19 pandemic kept Tritton from engineering his turnaround, and once he was let go last June, there was little interim CEO Sue Gove could do.
UBS analyst Michael Lasser said the BBBY bankruptcy could be the first of many in retail. He sees 90,000 of America’s 940,000 retail outlets closing in the next four years, blaming online shopping and rising costs. Some store operators, like Walmart (NYSE:WMT), are also blaming shrinkage on theft, with employee theft being as bad a problem as shoplifting.
Despite the bleak outlook, BBBY leases aren’t going begging. DollarTree (NASDAQ:DLTR), TJ Maxx (NYSE:TJX) and its HomeGoods unit, Five Below (NASDAQ:FIVE), Burlington (NYSE:BURL), and Ross Stores (NASDAQ:ROST) all see its large suburban strip mall locations as an opportunity.
What Happens Next?
The biggest winners from BBBY’s demise will be the industry leaders like Walmart, Target, Costco (NASDAQ:COST), and Amazon (NASDAQ:AMZN), which have the scale and confidence of consumers. The rich (firms), in other words, will keep getting richer.
On the date of publication, Dana Blankenhorn held long positions in AMZN and COST. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
