Bed Bath & Beyond reportedly taps law firm specializing in bankruptcy
Shares of Bed Bath & Beyond tumbled 16% on Monday after the struggling retailer reportedly hired a prominent law firm known for its work in bankruptcy restructurings.
The Union, NJ-based home goods chain has hired Kirkland & Ellis and is late on its payments to vendors, leading some to restrict shipments or halt them altogether, according to a Bloomberg report.
“If the company does not secure adequate financing to appease its vendor base, it might have not appropriate inventory for the key holiday period, leading to a fast downward spiral and creating bankruptcy risk,” according to a note by Wedbush analyst Seth Basham.
A cascade of bad news for the retailer was ignited last week when billionaire investor Ryan Cohen pulled his stake out of Bed Bath & Beyond, bagging s $68.1 million profit. Bed Bath & Beyond shares tumbled 41% on Friday after news of the stake sale by Cohen, an influential investor among the Reddit crowd who founded Chewy.com and who also is chairman of video game retailer GameStop.
Bed Bath & Beyond shares closed at $9.24, down $1.79.
It’s unclear what prompted Cohen to sell his position in the company, which forced out its CEO in June due to the company’s subpar performance. Cohen had successfully pushed for the company to add three new board directors and has also urged the retailer to sell itself.
Cohen purchased more than 7 million shares of Bed Bath & Beyond earlier this year.
There is concern that the company may not have enough cash and that vendors will demand payment upfront before shipping the struggling retailer goods.
One potential lifeline for the retailer is selling Buybuy Baby, which it acquired in 2007 for $67 million. Interim CEO Sue Gove said in a June call with analysts that the company is still considering a sale of the division, according to a CNBC report.
“Selling BABY might buy the company enough time to right its ship and ease vendor concerns,” Basham wrote in the note, adding, “but it does not fundamentally change the negative outlook for the core business, which is burning cash and losing resonance with customers.”