In its efforts to curb the growing number of COVID-19 cases, Bed Bath & Beyond Inc. BBBY extends store closures across the United States and Canada at least until May 2. The company’s all retail banners, except for buybuy BABY and Harmon Face Values ("Harmon") stores, in the United States and Canada has been closed since Mar 23.
In connection with extended store closures, the company plans to follow the suit of most retailers to cut on costs, including furloughing the majority of employees in stores and some corporate associates until up to May 2. However, it will pay 100% of healthcare premiums for all furloughed employees during the period. Also, eligible employees can apply for unemployment benefits.
Further, the company is temporarily reducing salaries for its executive team by 30%. Meanwhile, the chairman of the board and independent directors will also give up 30% of their quarterly cash compensations.
Among other actions, it has drawn down the remaining $236 million in its revolving credit facility. It is also reducing expenses, including lowering inventory levels and extending payment terms for goods and services. Further, the company is deferring $150 million of planned non-essential capital expenditure and prioritizing $250 million of capital expenditure for investments in digital and Buy Online Pick Up In Store. It is also postponing its share repurchases, dividends and debt reduction until further notice.
Other retailers, including Macy’s M and Gap GPS, have adopted similar measures to retain financial flexibility to tide over the uncertainties arising from the COVID-19 outbreak.
Apart from disrupting retailers’ business everywhere, the coronavirus pandemic has also put Bed Bath & Beyond’s previously agreed deal with 1-800-Flowers.Com Inc. FLWS to sell PersonalizationMall.com (“PMall”) in question. Per media reports, Bed Bath & Beyond has filed a complaint with Delaware's Court of Chancery to restore its $252 million worth deal with the 1-800-Flowers.Com.
1-800-Flowers.Com intimated on Mar 24 that it did not have the resources to close the deal and integrate the business due to the COVID-19 outbreak. It requested to postpone the closing of the deal to Apr 30, which was earlier scheduled to close on Mar 30.
Following this, Bed Bath & Beyond filed a lawsuit on Apr 1, stating that any party is not allowed to withdraw its obligations due to a calamity such as COVID-19.
On Feb 18, Bed Bath & Beyond announced an agreement to sell its online gifting business PersonalizationMall.com to 1-800-Flowers.com. The sale will include the PersonalizationMall.com website along with its modern 360,000 square feet production and distribution facility in Bollingbrook, IL.
The sale of the online gifting business is part of Bed Bath & Beyond’s ongoing business transformation strategy, which is aimed at the simplification of its business portfolio to improve the focus on the core Home, Baby and Beauty businesses. With the sale, the company expects to free up capital and invest in ways to re-establish its position in the home-furnishings category.
Following the closure, PersonalizationMall.com will continue to provide personalization and product services to Bed Bath & Beyond and buybuy BABY.
We note that shares of Bed Bath & Beyond have plunged 77.2% year to date compared with the industry’s decline of 42.6%. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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