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Retailer Bed Bath & Beyond Inc. (NASDAQ: BBBY) has been staggered by poor management, poor inventory control, lack of store upgrades and overwhelming competition. It has been one of America’s most troubled retailers for the past two years. CNN Business analysts believe the difficulties are so severe that Bed Bath & Beyond belongs on a list of store chains that could go bankrupt. The conclusion was based on credit agency reports and the chance the economy could continue its downturn.
One group that CNN Business consulted for its conclusions about dying retailers was an analyst team at Morgan Stanley. They commented: “We believe many will turn to aggressive discounting to solve their inventory problem, which is likely to spark a ‘race to the bottom.’”
There is no reason to go beyond the company’s stock price to prove the pessimism about its future. Shares have dropped 64% this year to $5. The stock traded for $50 a share less than two years ago.
Bed Bath & Beyond might have already run out of money, but it raised over $1 billion in August. As part of the process, it laid off corporate staff and said it would shut down about 150 stores. Sue Grove, the interim chief executive officer, made the announcement. The company does not have a seasoned, permanent team to guide it through the most difficult period in its history.
Bed Bath & Beyond’s nosedive has been remarkably swift. In the quarter that ended August 27, revenue dropped 28% to $1.4 billion. The company lost $366 million.
One fairly constant rule about the retail industry is that companies cannot cut their way to profitability. It has been tried and has failed in recent decades. The best-known wrecks that went through this process are J.C. Penney, Sears and Kmart.
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Among Bed Bath & Beyond’s highest hurdles is that its household appliances, furniture and accessories face similar products sold by Walmart, Amazon and Target. Those are the three largest competitors, but the full list is much longer.
Bed Bath & Beyond has three months to save itself. By early January, it can determine how well or poorly its critical holiday sales period has performed. If the results are anything less than strong, the company is done for.
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