Amid attempts to turn around its larger business, Bed Bath & Beyond has filed to liquidate its operations in Canada.
In a filing with the Ontario Superior Court of Justice seeking protection from creditors, posted on the website of consultants Alvarez & Marsal, Bed Bath & Beyond Canada noted that its operation, consisting of 54 namesake and 11 buybuy BABY stores, could not go on without support of the parent company, Bed Bath & Beyond Group, which is focused on reviving the business in the United States.
The filing maintained:
Bed Bath & Beyond Canada is not profitable on a standalone basis. Bed Bath & Beyond Canada has realized significant net losses for the nine months ending November 26, 2022. Moreover, Bed Bath & Beyond Canada contributes negative EBITDA margin to the Bed Bath & Beyond Group’s consolidated business. While consideration was given to closing a smaller subset of poorly performing stores and continuing operations in Canada with a reduced footprint of stronger performing locations, the Bed Bath & Beyond Group has concluded that the economics of doing so are not justifiable. Without an operation of scale, the costs of accessing inventory, securing necessary transportation arrangements and maintaining operational infrastructure would significantly impact the profitability, if any, of these remaining Canadian locations.
Further, a significant amount of capital is required to replenish the inventory in Canada, satisfy accounts payable, and rebuild vendor relationships. Inventory levels at the Canadian stores are at historic lows, due to the financial challenges faced by the enterprise, tightened or unavailable trade credit, and/or the unwillingness of suppliers to ship merchandise.
Bed Bath & Beyond Canada was dependent on the larger company to provide critical shared services the larger company is unable to continue and for rights to the Bed Bath & Beyond and buybuy Baby names. With the withdrawal of support form the company at large, as well as the lack of backing from lenders, the Canadian operation doesn’t have the capability to recapitalize or restructure, according to the filing.
The filing also indicated that, as at November 26, 2022, the Bed Bath & Beyond Canada had total assets of $427.4 million, and total liabilities of $342.8 million while buybuy BABY Canada had total assets of $52.7 million and total liabilities of $86.9 million.
The court document spelled out the background for Bed Bath & Beyond Canada’s current distress. It stated that Bed Bath & Beyond Group has been in financial difficulty for the past several years, suffering significant net losses since 2018. Over the period, BBB Canada experienced dramatic declines in revenues.
Investment bank Lazard Frères & Co. retained by the Bed Bath & Beyond Group, began a marketing process to identify an executable transaction that included a sale of some or all of the Canadian business. However, the bank’s efforts to identify a going concern solution for Canada were unsuccessful despite multiple outreaches to third parties. As such, Bed Bath & Beyond Group has concluded that there is not enough capital available to restructure its business in the United States and properly resuscitate the Canadian business to achieve profitability.
An email from HomePage News to Bed Bath & Beyond asking for comment on the Canada business shutdown was not immediately returned.
