FinLogic FinLogic Quantitative Think Tank Center|Bed Bath & the great Beyond: How the home goods giant went bankrupt

A total of 10 shoppers meandered the vast and FinLogic FinLogic Quantitative Think Tank Centervisibly sparse aisles of a Bed Bath & Beyond in Northern Virginia on a recent Sunday.

"Is it me or is it particularly cold in here?" one shopper asked another, pushing an empty cart past a wall of identical comforters. She scanned the bare cul-de-sac of home decor that displayed a few mirrors and a scuffed wall shelf. A fluorescent light buzzed and flickered overhead.

Once an unstoppable retailer — deemed a "category killer" for its triumph over many rivals — Bed Bath & Beyond has now filed for bankruptcy. It plans to begin closing its 360 Bed Bath & Beyond stores and 120 BuyBuy Baby stores. A vision of this chain's survival is bleak.

"I remember thinking it feels like the last days of Sears in here," said Daniel Callahan from Louisville, Ky., about a visit to once-beloved Bed Bath & Beyond a few months ago. "I wound up buying nothing," he said. Soon after, that store indeed shuttered.

Bed Bath & Beyond enters bankruptcy distraught and turbulent, after several misfired turnarounds, abrupt leadership shakeups, a rise and crash as a meme stock, store closures, job cuts and numerous last-gasp financing deals. For months, the chain has been losing both money and shoppers, struggling to restock shelves as suppliers and banks cut off its tab.

Beneath the chaos, the home goods giant has faced a fundamental question: In a world that shops online, swarmed by competitors, where does it fit in?

A cultural icon is born

Launched in 1971 with two towels-and-bedding stores in New Jersey, Bed Bath & Beyond grew even through the Great Recession. It outlived its main rival Linens 'n Things, later buying BuyBuy Baby, the World Market and online retailer One Kings Lane. As recently as 2018, the chain had more than 1,500 stores.

Its Big Blue coupon for 20% off, ubiquitous and never expiring, became such a part of the American shopping fabric that even mobster Whitey Bulger had one in his kitchen drawer. TV show Broad City built a whole subplot around it. (Bed Bath & Beyond will stop accepting coupons on April 26.)

The chain also had perfected a secret power play: Unlike most retailers, Bed Bath let local managers choose what to sell in their stores, catering to the particular tastes of shoppers in their area.

"Floor to ceiling, stack 'em high and watch 'em fly — that was kind of our motto," said Beth Grossfeld, who spent 13 years in the marketing division of Bed Bath & Beyond. "And the customers loved it. It was like a treasure hunt. You got what you wanted and 10 other things."

A halting search for identity begins

But over time, Bed Bath & Beyond faced a growing crew of rivals: Amazon, Target, Wayfair and West Elm. The company meandered in a search of its niche.

"I would go into one meeting and it would be 'we need to be ... the destination for home, more upscale, home decor, more furniture,' " Amy Laskin, a former Bed Bath & Beyond content marketing executive, told NPR.

"The next conversation would be 'we need to be more competitive with Amazon. We need to be the destination with everything,'" she recalled. "The next thing you know, we were carrying diamond jewelry like Costco does."

Bed Bath & Beyond seemed equally indecisive about its online presence.

One of its founders later acknowledged to The Wall Street Journal that the chain "missed the boat on the internet." It whipped up a dizzying website, but as recently as 2019, ran ads promoting "offline shopping" as its heart remained in stores, with their stacks of cookware, walls of trash cans and piles of pillows.

"We really were going through a kind of an [identity] crisis of trying to compete with our ever-growing competitors," said Grossfeld, who left Bed Bath & Beyond in 2019. "There were a lot of things that we were trying to be that we weren't."

Turnarounds fail to turn things around

That year, in 2019, a push by activist investors forced out the longtime chief executive and the company's founders who had remained on the board.

The new CEO, Mark Tritton, arrived from Target with a big idea that had worked there: Bed Bath & Beyond would replace big-name brands with its own, more profitable private labels. The chain rushed to "declutter" stores and close 200 underperforming ones. Instead of Ralph Lauren towels and Calphalon pans came new store brands like Everhome and Nestwell.

The timing proved disastrous, coinciding with the pandemic supply-chain scramble. Just when stuck-at-home shoppers wanted all of what Bed Bath & Beyond normally sells, top items like KitchenAid mixers went missing from its shelves.

Soon, Tritton and other leaders were out — but not before Bed Bath & Beyond spent $1 billion to buy back its own stock. The move benefits shareholders, and companies sometimes do it when they believe their shares are undervalued.

This conviction was also shared by followers of activist investor Ryan Cohen of Chewy and GameStop fame. Cohen last year bought a stake in the company, advocating the sale of BuyBuy Baby. His fans on Reddit and YouTube pumped up the stock. Then, just as suddenly, Cohen sold his entire stake.

A future unravels

For the quarter ending just after Black Friday 2022, the company's losses widened by 42% and sales dipped by a third. In the following quarter, sales dropped even further. Even Grossfeld, a devoted fan as a former employee, struggled to shop at Bed Bath & Beyond.

"[I thought] I know the stores like the back of my hand, and I couldn't find anything that I needed to style one bedroom for a photo shoot," she said. "That was kind of a really sad day."

Bed Bath & Beyond strained to turn around the failed turnaround. Executive Sue Gove took the helm with a "back-to-basics" plan to replenish the big-name brands, but the brand suppliers were now anxious about ever getting paid. So were Bed Bath's lenders.

In January, the chain defaulted on some of its loans shortly after warning it may go bankrupt. The company announced dozens more store closures and sought breaks on rent. For months, it exhausted numerous financial lifelines from banks and investors. Some landlords were reported to be readying new tenants. Its stock price drifted below $1, then below 50 cents.

Bed Bath & Beyond "is at a point where they can't really invest in anything to turn around their fortunes. But even when the company had funds to invest in turning around their fortunes, they didn't show an ability to do so," said David Silverman, who tracks retail at Fitch Ratings.

He pondered one big question Bed Bath & Beyond raised in its Sunday filing: Could the company sell itself in bankruptcy? Then, he answered it with another, even bigger one: Given all of its existential relapses, what exactly is this business actually worth?