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Bed Bath & Beyond has said that it’s in default on its loans and doesn’t have sufficient funds to repay what it owes.
The home goods chain said in a regulatory filing on Thursday that the default on the loans from JPMorgan Chase would force it to consider alternatives, including restructuring its debt in bankruptcy court.
Shares in the company based in Union, New Jersey, went into freefall, dropping 22% by the closing bell and triggering three temporary trading halts on the Nasdaq Exchange.
It follows months of struggles for Bed Bath & Beyond, which warned on January 5 that it was considering options including filing for bankruptcy, saying that there was ‘substantial doubt’ that it could stay in business.
Bed Bath & Beyond has said that it’s in default on its loans and doesn’t have sufficient funds to repay what it owes
Shares in the company based in Union, New Jersey , went into freefall, dropping 22% by the closing bell and triggering three temporary trading halts
A week later, it reported a 33% drop in sales and a widening loss for its fiscal third quarter that ended November 26, compared with same period last year.
Sales at stores that had been open for at least a year – a key indicator of a company’s health – dropped 32%.
Its recently appointed president and CEO, Sue Gove, blamed the company’s poor holiday performance on inventory constraints and reduced credit limits that resulted in shortages of merchandise on store shelves.
Typically, struggling retailers file for bankruptcy protection after the holiday shopping season because they have a cash cushion coming from the two-month sales period.
Still, turning around Bed Bath & Beyond is expected to be difficult amid increasing competition from discounters. Its struggles come as the economy is weakening, and shoppers are tightening their purse strings.
It has been trying to turn around its business and slash costs after previous management’s new strategies worsened a sales slump.
Activist investor Ryan Cohen, the chairman of GameStop, last year took a stake in Bed Bath & Beyond, which he later sold, sending shares of the one-time ‘meme stock’ crashing.
Sue Gove was appointed as permanent CEO of Bed Bath & Beyond after taking over the position in an interim capacity back in June 2022. She said financial performance was ‘negatively impacted’ by inventory constraints
The company announced in August it would close about 150 of its namesakes stores and slash its workforce by 20%. It also lined up more than $500 million in new financing.
New CEO Gove took the reigns of the embattled company after a tumultuous year, in which former Bed Bath & Beyond CFO plunged to his death in an apparent suicide in September 2022.
The company was embroiled in a media frenzy when Arnal jumped to his death from New York City’s ‘Jenga’ building.
At the time, Arnal was being accused in a lawsuit of artificially inflating the company’s stock price in a ‘pump and dump’ scheme to sell off his shares at a higher price, DailyMail.com revealed in September.
Arnal was listed as one of the defendants in a class action lawsuit brought by a group of shareholders who claim they lost around $1.2billion.
The lawsuit, filed in the United States District Court for the District of Columbia on August 23, claims Cohen had approached Arnal about a plan to control shares of Bed Bath and Beyond so they could both profit.
Gustavo Arnal, 52, was facing a billion dollar lawsuit just one week before he died for allegedly inflating the price of Bed Bath and Beyond shares in a get-rich-quick scheme
As part of the plan, the lawsuit claims, Arnal ‘agreed to regulate all insider sales by BBBY’s officers and directors to ensure that the market would not be inundated with a large number of BBBY shares at a given time.’
He then allegedly issued ‘materially misleading statements made to investors regarding BBBY’s strategic company plans, financial condition… and reports of shares holding and selling’ to help increase share prices.
By the time Arnal sold over 42,000 shares in the company in August, it was valued at $1 million, according to MarketBeat.com .
The lawsuit was then filed just one week before Arnal took his own life by jumping from the 18th floor of the famous ‘Jenga’ tower in lower Manhattan’s Tribeca neighborhood.
The class action lawsuit was brought by Virginia resident Pengcheng Si on behalf of all those who purchased BBBY’s stocks between March 25 and August 18.
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