Many investors consider it a good sign when an executive invests their cash in the company they run. After all, who knows better what opportunities a business has? Unfortunately, it may not always be the case. On Wednesday, filings with the Securities and Exchange Commission showed Bed Bath & Beyond interim CEO Sue Gove purchased $230,500 worth of stock, while directors Harriet Edelman and Jeff Kirwan each put in nearly $50,000 to add to their holdings. Shares of Bed Bath & Beyond jumped more than 20% in Thursday trading on the news. But the home appliance retailer was not only struggling, but also having serious liquidity problems. In fact, the Gove acquisition could be seen as a sign of weakness. Some see it as an attempt to ignite more confidence in Bed Bath & Beyond’s future as it prepares for the all-important holiday shopping season. It could also be a gesture to appease activist investor Ryan Cohen. The billionaire founder of online pet retailer Chewy and current chairman of GameStop was a shareholder of Bed Bath & Beyond through his investment firm RC Ventures. Cohen has been agitating change at the company for months, and has long criticized management teams for not being keen on the game. Cohen has reiterated this stance on Twitter since Mark Tritton, the former CEO of Bed Bath & Beyond, was ousted last week. Tritton was forced out after the company reported dismal first-quarter results, with same-store sales up 27%. Through a spokesman, Cohen declined to comment. “At best, this is window dressing,” said Anthony Chukumba, an analyst at Loop Capital. “I mean, it doesn’t change in any way, shape or shape the underlying story, and the underlying story is terrible.” Chukumba currently has a sell rating on the stock and is increasingly concerned that a Chapter 11 bankruptcy filing is imminent. A lover of meme stocks during the cash crunch Bed Bath & Beyond stock has been caught up in the meme-stock craze. Its shares have seen brief interest that has fueled massive rallies. But interest rates have fallen and stocks are down more than 65% since the start of the year. It closed on Friday at $5.09. Gove’s challenges at Bed Bath & Beyond are numerous, but cash is what’s urgent. The retailer burned through more than $500 million in its first fiscal quarter ending May 28, leaving a balance of about $100 million in cash and $700 million in revolving lines of credit. In a research note, Bank of America analyst Jason Haas says he is modeling Bed Bath & Beyond to burn through $200 million in cash in the second fiscal quarter and $100 million in the third. . His model then predicts the company will have $200 million in cash flow when it sells through its inventory over the holiday season. This scenario is only possible if Bed Bath & Beyond has shelves stocked with all the goods the buyer wants to buy. One obstacle management can face is if suppliers are afraid to change credit terms. This has happened with other retailers in the past, most notably Sears. And it will make an already bad situation worse. Suppliers are often unsecured creditors in bankruptcy court proceedings, and that can expose them to large losses if a retailer seeks Chapter 11 protection. To limit their risk, suppliers can cut shipments to a troubled retailer – or stop supplying merchandise altogether. The other option is to request a larger upfront payment or a shorter payment term. The impact can be huge. Bank of America Haas calculated that if suppliers reduced the payment period from 60 days to 30 days, Bed Bath & Beyond would have a cash flow of $400 million. It’s a difficult position to support given its current liquidity, Haas said. Looking for Liquidity Maybe Gove is expected to provide Bed Bath & Beyond with a financial cushion by raising money through a new share or debt issue. Loop’s Chukumba doubts Bed Bath & Beyond can raise more funds. Bed Bath & Beyond was not immediately available for comment. But on the latest earnings call, chief financial officer Gustavo Arnal said the company has enough liquidity. “We have enough liquidity in our credit as we talk and work with [Berkeley Research Group], working with our financial advisors, there are ways we are exploring to even add more liquidity and navigation in the working capital cycle, especially over the next two quarters, based on the seasonality of our business,” Arnal said. So we are confident in our ability to manage cash, liquidity, strengthen our balance sheet, and are very focused on where we invest and where we take costs out. “Along with the earnings report, Bed Bath & Beyond announced it has hired consulting firm Berkeley Research Group to help with cash, inventory and balance sheet management. Berkeley has worked with a number of experts. struggling retail, including Modell’s, Things Remembered and Gymboree, the three retailers eventually sought bankruptcy protection.Gove is not a newcomer to the company or the industry. industry experience as an executive at golf equipment retailer Golfsmith and jeweler Zale and as a retail restructuring consultant Gove al has thus joined the board of Bed Bath & Beyond since 2019 and serves on its strategy committee.The company’s difficulties and precarious financial situation are well known to her.Tritton’s efforts at Bed Bath & Beyond Bed Bath & Beyond have failed when Tritton, a former Target executive, joined three years ago, making him the first executive to lead the immature retailer. into its ranks. He quickly moved on to starting his own team and trying to implement some of the strategies that have been very successful for him as Target’s chief merchant. Most notably, he has launched several private labels. At the same time, he scaled back the coupons, which proved unpopular with Bed Bath & Beyond’s most loyal customers. The combination of these two moves could have been undone by him. Newer store brands don’t have time to engage and attract new shoppers. At the same time, the store’s premises ran away when the discounts they were entitled to were taken away. Tritton’s other efforts should have improved its financial position. He sold half of the company’s real estate, raking in more than $250 million in proceeds, and he gave up businesses that weren’t his own like Cost Plus World Market and Christmas Tree Shops. But part of that money has gone into renovating stores to make them appear less cluttered as part of his restructuring plan. The company also accelerated its $1 billion share buyback program. That decision is now being questioned. “It makes no sense for them to buy back shares too aggressively when they are in a particularly bad turnaround,” Chukumba said. “It doesn’t make any sense. They should have preserved their liquidity.” Now, Tritton and many other executives are out. Chief accountant John Barresi, chief merchant Joe Hartsig and SVP of financial planning and analysis Heather Plutino have all left. The fate of Buybuy Baby? Cohen has pushed for the sale or transfer of buybuy Baby, but splitting the business could leave Bed Bath & Beyond in an even worse financial position, according to analysts. Buybuy Baby is the star of the company’s portfolio. It has continued to increase sales and has a strong position in the category. During a recent earnings call, Edelman, independent president of Bed Bath & Beyond, said the company is working to define the future of buybuy Baby. “This business is a very lucrative business and we are not alone in appreciating its value,” Gove added. “We know there’s interest.” Chukumba recently looked at other companies he sponsored that had gone bankrupt to see if there were any parallels to Bed Bath & Beyond’s situation. He said the most surprising thing he discovered was that the companies he examined – Circuit City, HHgregg and Pier 1 Imports – all tended to sell better in the two quarters before filing for protection. bankruptcy compared to the current Bed Bath & Beyond. In addition, all three retailers have less leveraged balance sheets, he said. Bed Bath & Beyond had $1.27 billion in net debt, while HHgregg had only $28 million in net debt when it filed. Pier One has $346 million, and Circuit City has $189 million. The retail trend is also not in the company’s favor. The economy is slowing and retailers, including Walmart and Target, have found themselves with excess inventory. “Surname [Bed Bath & Beyond] “What do you think happens when suddenly the macro, instead of this big wind, is now a pretty big headwind?” he said.
Why Bed Bath & Beyond CEO Buys Stocks a Sign of Stress, Not Strength
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