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Bed Bath & Beyond has said it is in default on its loans and does not have enough funds to pay what it owes.
The home goods chain said in a regulatory filing Thursday that a default on JPMorgan Chase’s loans would force it to consider alternatives, including restructuring its debt in bankruptcy court.
Shares of the Union, New Jersey-based company entered a freefall, falling 22% at the close of the day and causing three temporary halts in trading on the Nasdaq Exchange.
It follows months of struggle for Bed Bath & Beyond, which warned on Jan. 5 that it was considering options, including filing for bankruptcy, saying there were “substantial doubts” it could stay in business.
Bed Bath & Beyond has said it is in default on its loans and does not have enough funds to pay what it owes.
Shares of the Union, New Jersey-based company entered a freefall, falling 22% at close and causing three temporary trading halts.
A week later, it reported a 33% drop in sales and a widening loss for its fiscal third quarter that ended Nov. 26, compared with the same period last year.
Sales at stores that had been open for at least a year, a key indicator of a business’s health, fell 32%.
Its newly appointed president and chief executive officer, Sue Gove, blamed the company’s poor performance over the holidays on inventory restrictions and reduced credit limits that resulted in shortages on store shelves.
Typically, distressed retailers file for bankruptcy protection after the holiday shopping season because they have a cash cushion from the two-month sales period.
Still, changing Bed Bath & Beyond is expected to be difficult amid increasing competition from discount stores. Its problems arise when the economy is weakening and shoppers are tightening their pockets.
It has been trying to turn its business around and cut costs after the previous administration’s new strategies made the sales slump worse.
Activist investor Ryan Cohen, the chairman of GameStop, last year took a stake in Bed Bath & Beyond, which he later sold, sending shares of the former “meme stock” plummeting.
Sue Gove was appointed permanent CEO of Bed Bath & Beyond after taking over on an interim basis in June 2022. She said financial performance was “negatively affected” by inventory restrictions.
The company announced in August that it would close about 150 of its namesake stores and reduce its workforce by 20%. It also lined up more than $500 million in new financing.
New CEO Gove took the reins at the beleaguered company after a tumultuous year, in which the former CFO of Bed Bath & Beyond plunged to his death in an apparent suicide in September 2022.
The company was thrown into a media frenzy when Arnal jumped to his death from the ‘Jenga’ building in New York City.
At the time, Arnal was being accused in a lawsuit of artificially inflating the company’s share price in an ‘inflate and dump’ scheme to sell its shares at a higher price, DailyMail.com revealed in September.
Arnal was listed as one of the defendants in a class action lawsuit brought by a group of shareholders who claim they lost about $1.2 billion.
The lawsuit, filed in the United States District Court for the District of Columbia on August 23, claims that Cohen approached Arnal about a plan to control the shares of Bed Bath and Beyond so that both could make a profit.
Gustavo Arnal, 52, was facing a multi-billion dollar lawsuit just a week before he died for allegedly inflating Bed Bath and Beyond’s share price in a get-rich-quick scheme.
As part of the plan, the lawsuit claims, Arnal “agreed to regulate all inside sales by BBBY officers and directors to ensure that the market is not flooded with a large number of BBBY shares at any given time.”
He then allegedly issued ‘materially misleading statements made to investors regarding the company’s strategic plans, BBBY’s financial condition… and reports of holding and selling shares’ to help drive up stock prices.
When Arnal sold more than 42,000 shares of the company in August, it was valued at $1 million, according to MarketBeat.com.
The lawsuit was then filed just a week before Arnal took his own life by jumping from the 18th floor of the famous ‘Jenga’ tower in the Tribeca neighborhood of lower Manhattan.
The class action lawsuit was filed by Virginia resident Pengcheng Si on behalf of all those who purchased BBBY shares between March 25 and August 18.
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