Just when it seemed that things couldn’t get worse for Bed Bath & Beyond (OTCMKTS:BBBYQ), new complications are coming to light. This struggling retailer has watched its share price decline since even before it filed for Chapter 11 bankruptcy. Indeed, BBBYQ stock has dropped almost 95% over the past six months. However, now the company is also facing challenges from Capitol Hill.
On July 5, Senators Elizabeth Warren (D-MA) and Cory Booker (D-NJ) penned a letter to CEO Sue Grove expressing their concerns over some allegations. Specifically, Bed Bath & Beyond has allegedly failed to pay severance to many of the workers who lost their jobs when the company closed down retail locations en masse.
Shares of BBBYQ stock are rising slightly today despite this news, but the letter certainly doesn’t bode well for Bed Bath.
What’s Happening With BBBYQ Stock?
As InvestorPlace contributor Chris MacDonald reports, BBBYQ stock simply has no hope left. This company struggled long before it declared bankruptcy, but since doing so, Bed Bath has only encountered more problems — even despite retail investors refusing to sell shares as its stores closed and prices plunged. Most recently, Bed Bath’s deal to sell off its Buy Buy Baby franchise to Go Global Retail fell apart after the two companies couldn’t agree on a valuation.
Now, though, if Warren and Booker are to be believed, Bed Bath & Beyond hasn’t done right by its workers as well. According to the letter, while the company has not paid severance to thousands of out-of-work staff members, it has spent billions on stock buybacks over the past two decades.
Per the letter:
“Despite the billions paid out to your shareholders, Bed Bath & Beyond is attempting to avoid paying severance to its workers. In its home state of New Jersey, the company announced layoffs of 1,295 workers on April 9th – the day before a New Jersey state law giving laid off workers enhanced protections and guaranteed severance went into effect […] While your company has, under enormous public pressure, reversed course in New Jersey and agreed to recognize the newly expanded protections […] employees in other states have reported being denied severance pay and other benefits they promised.”
The letter goes on to raise some important questions about how Bed Bath & Beyond plans to address these matters. For example, Warren and Booker ask how much of the $240 million Bed Bath recently secured from Sixth Street Specialty Lending will go toward employee benefits. They also press Gove to provide further information on the company’s avoidance of severance pay “while shareholders and some executives walk away unscathed.” As of now, Bed Bath has not yet issued a response to the letter
What It Means
The fact that Bed Bath & Beyond has been poorly run is far from breaking news. A quick look at how BBBYQ stock has performed since it began trading over-the-counter (OTC) should tell investors all they need to know. However, powerful lawmakers are also targeting the company now.
Increased scrutiny will only push shares of BBBYQ down further. No matter how low it trades, Bed Bath & Beyond repeatedly proves that it can always fall further.
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On the date of publication, Samuel O’Brient 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.
