Bed Bath & Beyond will unveil its turnaround plan Wednesday. Here are 5 issues investors want addressed

A pedestrian walks by a Bed Bath and Beyond store on November 04, 2021 in Larkspur, California.

Justin Sullivan | Getty Images

1. A potential cash infusion

A key part of the announcement will be clarity around how Bed Bath plans to replenish its cash coffers to pay suppliers, take care of other expenses and keep investing in the business.

Bed Bath & Beyond’s net loss widened in the most recent quarter as sales slowed and the company ended May with about $100 million in cash, down from $1.1 billion a year ago.

As shares of the retailer were swept into a meme-fueled run-up in early August, the company said it was working with financial advisors and lenders to strengthen its balance sheet.

The retailer has not shared details about how it would accomplish that, but The Wall Street Journal reported last week that the company and asset manager Sixth Street Partners are nearing final terms on a loan of nearly $400 million. Sixth Street and Bed Bath did not respond to CNBC’s requests for comment.

Bed Bath’s cash crunch could worsen if the company did not adequately prepare to take advantage of the busy back-to-school shopping season, said David Silverman, a retail senior director at Fitch Ratings.

“Your liquidity position can get strained as you move through the year for a seasonally oriented retailer because you’re building working capital,” he said.

If Bed Bath secures extra cash ahead of the holiday season, it can put off questions about its financial stability and focus on fixing its business, said Seth Basham, an analyst for Wedbush Securities.

“Then it’s whether or not the customer comes back to them,” he said.

2. Luring shoppers back

Aside from fixing its financials, Bed Bath needs to convince consumers to give it another shot.

Shoppers can easily buy household items like towels and kitchen gadgets at places like Amazon and Target. In almost every category that Bed Bath sells, “there’s someone else in the market that does it better,” said Neil Saunders, managing director of GlobalData, a retail consulting company.

“The problem I have with Bed Bath and Beyond — and I think a lot of customers have with it — is that it feels like ‘Why would I go there?'” he said.

Headlines about its dire financial state could also turn off customers, said Harry Kraemer, professor of management and strategy at Northwestern University’s Kellogg School of Management.

“Do I want to buy a gift card for my relatives when the store may not be there a year from now?” he said.

For now, Bed Bath may want to turn to its tried-and-true strategy of giving away tons of 20% off coupons. Discounts may be the quickest way to drum up store traffic, particularly as shoppers feel pinched by inflation, said Wedbush’s Basham.

But over the long term, Bed Bath needs to think of a smarter way to stand out, said Steve Dennis, a retail consultant and former Sears executive. Other troubled retailers have found a way forward: Best Buy added services like Geek Squad as sales of merchandise like CDs and DVDs faded away, while Petco and Petsmart launched private brands and added vet care, so they didn’t just compete on pet food prices.

Dennis warned that struggling retailers can dig themselves deeper into trouble by shrinking store footprints or reducing staffing to cut costs. That could lead to less convenience and poorer customer service, driving shoppers away.

“It always worries me when companies get to this point because the things they can do that are easy usually make things worse,” he said. “You look like you’re making progress, but you end up cutting into the muscle sometimes.”

3. The merchandise riddle

4. Supply chain fixes

5. ‘Bye bye’ Baby?

Earlier this year, Bed Bath’s baby goods brand appeared to be on the auction block.

A potential sale or spinoff of Buybuy Baby gained traction in the spring, when Bed Bath agreed to explore strategic options for the banner as part of a truce with Cohen.

Already, Bed Bath has sold off pieces of its business, including Christmas Tree Shops, Cost Plus World Market and One Kings Lane. Now it needs to raise more cash, but it may have missed the window to sell Buybuy Baby.

Bankers say deals in the retail industry have slowed to a near halt with so much uncertainty around consumer behavior amid high inflation. In June, Kohl’s terminated talks to sell its business, citing a deteriorating retail environment and tough backdrop for pulling together financing. Walgreens also scrapped plans to sell its U.K.-based Boots business because of changes in the global market.

“Inflation shot up, businesses’ profitability started to get tighter [and] boards were trying to figure out which way is up,” said Michael Kollender, head of consumer and retail investment banking at Stifel.

But if a company is struggling enough, it’s going to need to strike some sort of deal, said Kollender. If it’s not divesting part of the company, he said it might be a restructuring.

If Bed Bath does find a buyer for BuyBuy Baby, however, it risks losing one of its bright spots. Saunders of GlobalData said the baby goods business tends to be steady, even during tougher economic times.

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