Bed Bath & Beyond, the US home goods chain, has warned that there is substantial doubt about its ability to continue as a going concern, raising the prospect of one of the country’s largest retail bankruptcies since the start of the pandemic.

The company, which has almost 1,000 stores, told investors it was considering strategic alternatives including a debt restructuring, raising new debt or equity, selling assets and “obtaining relief under the US bankruptcy code”.

Shares in the group closed down 30 per cent on Thursday. Its market capitalisation, which stood at $17bn a decade ago, has fallen below $200mn.

Bed Bath & Beyond’s balance sheet has been stretched for some time but its reduced credit left it struggling to buy the stock it needed for the peak holiday season. It cited “reduced inventory availability”, as well as lower customer traffic, among the reasons why it expects to report a sharp year-on-year drop in sales for the quarter to November 26, from $1.88bn to about $1.26bn. 

Impairment charges of about $100mn will also increase its net loss for the period from $276mn a year ago to about $386mn, it said.

The group, which had more than $1.7bn in long-term debt at the end of August, secured a $375mn loan from Sixth Street Partners in August. It had also been seeking to reduce its debt through a bond exchange which credit rating agencies saw as tantamount to a default because noteholders would receive less than they were originally promised.

It had already extended the deadline several times, but on Thursday said it had terminated the exchange offer after too few holders tendered their unsecured notes to satisfy its conditions.

Bed Bath & Beyond’s unsecured notes maturing next year slid to just under 12 cents on the dollar, almost halving in price from 22 cents on Wednesday.

The company’s bonds maturing in 2034 also dropped in price to around 6 cents on the dollar, from 10 cents a day earlier.

Most US retailers entered the critical holiday season with healthy levels of inventory this year, in contrast to the first two years of the pandemic, which were complicated by supply chain disruptions and sharp changes in consumers’ buying patterns.

Bed Bath & Beyond had struggled more than most to stock the items its customers wanted, however, with vendors growing nervous about its ability to pay its bills.

“Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macroeconomic challenges,” said Sue Gove, chief executive.

The group was using liquidity brought in by holiday season sales to restore inventory levels, she said. However, Bed Bath & Beyond said it had asked the Securities and Exchange Commission for more time to complete its quarter-end reporting, including “asset impairment testing”.

The group’s troubles come as inflation weighs on most US retailers after a period in which government stimulus packages had boosted consumer spending.

Adobe Analytics on Thursday reported US consumers had spent $212bn online in November and December, 3.5 per cent more than in the same period of 2021. That pace of growth was below the headline inflation rate but was enough to set a new record for holiday ecommerce spending.

Additional reporting by Harriet Clarfelt in New York

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