Dive Brief:
- Wary suppliers calling for shorter payment terms potentially cost Bed Bath & Beyond many millions of dollars in lost sales during a key period for retail during the holiday season.
- The company reported a YoY decline in net sales of 33%, which it attributed to an in-stock position lower by 70% along with a decrease in customer traffic during the third quarter, which ended Nov. 26.
- “Although we moved quickly and effectively to change the assortment and other merchandising and marketing strategies, inventory was constrained and we did not achieve our goals,” Bed Bath & Beyond President and CEO Sue Gove said in a statement.
Dive Insight:
On a conference call Tuesday, Gove pegged declining in-stocks to the company’s trade credit with suppliers after 2022 brought executive turnover, downgrades and disappointing financial results.
“Despite this progress on owned brands, rebuilding our national brand presence will take time,” Gove said of Q3 during the call. “Following some of the micro and macroeconomic challenges we and the sector faced at the beginning of the quarter, we experienced an acceleration in vendor payment terms and credit line constraints.”
Gove, who took over as interim and then permanent CEO in 2022, noted that those constraints led to lower receipts for goods and, in turn, lower in-stock levels and sales. She added that the retailer has “worked diligently with our supplier partners and our payables remain at healthy levels.”
The retailer’s struggles deepened in 2022 as sales and profits declined with a slowdown in home goods sales and despite numerous turnaround initiatives over the years. Last week, Bed Bath & Beyond disclosed that it was considering a possible bankruptcy among other strategic alternatives as it wrestles with continued losses and cash burn.
Tightened payment terms are common for retailers and brands facing financial distress and can accelerate a financial tailspin by adding to a company’s liquidity pressures, such as in the case of Revlon last year. For suppliers, asking for shorter payment terms or cash on delivery is a defense against losing payment in a bankruptcy scenario.
A Bloomberg Law report Tuesday, based on anonymous sources, cited tightened terms with suppliers as an accelerant in the Bed Bath & Beyond’s financial decline and noted the retailer has “sometimes” struggled to make payments of late.
Gove said Tuesday that Bed Bath & Beyond has “already leveraged the liquidity gain from the holiday season to pursue more inventory and higher in-stock levels with support from our key vendors” and that “[a]dditional efforts are also underway to further increase stock levels.”
