What's next for Bed Bath & Beyond after its CFO's death
- The death of Bed Bath & Beyond's chief financial officer, Gustavo Arnal, has renewed scrutiny of the struggling company.
- The home goods retailer has faced a series of financial and merchandising challenges in recent history.
Bed Bath & Beyond's chief financial officer Gustavo Arnal died Friday after falling from a New York City building, rocking the retail world. The tragedy also sparked renewed public scrutiny on the challenges the struggling retailer has faced in recent months.
Here's a look at what has led up to this critical juncture, and whether the company will sink or swim from here.
How we got here
The company has been on a rollercoaster in recent months.
For a short time, its status as a meme stock gave the beleaguered retailer a much-needed boost, driving up shares more than 360% last month in an apparent short squeeze, but the rally didn't last long.
Sales at the chain have been slumping for years. In late 2019, the company mounted an effort to turn things around, bringing in fresh blood in new CEO Mark Tritton as six senior executives departed in a major leadership shakeup.
Tritton's tenure was short-lived, though, as he was ousted in June after the company posted lackluster sales for two consecutive quarters, sending its stock plunging. He was replaced by board member Sue Gove in the interim.
Last week, the company announced it's closing 150 stores and slashing 20% of its corporate staff, with the aim of cutting $250 million in costs this fiscal year. Its stock plummeted by more than 24% after the company said in a subsequent earnings call that sales across stores fell 25% in the previous quarter.
Arnal's death came less than two weeks after he was named in an insider trading lawsuit that alleges federal securities fraud, insider trading, and breach of fiduciary duty. The lawsuit also names activist investor and GameStop Chairman Ryan Cohen, accusing the two of providing "materially false statements regarding the financial condition and holding situation" at the company for their own financial gain.
Arnal sold 55,000 of his shares of the company on August 16 and 17 for an estimated $1.4 million, according to an SEC filing, while Cohen offloaded his entire 9.8% stake through his firm, RC Ventures, causing shares to fall.
How things currently look
The financial world has picked up on a few red flags at Bed Bath & Beyond in recent days.
S&P Global Ratings downgraded the company last week from a "CCC" to a "CCC-" rating, reflecting "lower recovery prospects" for the company's "unsecured lenders."
S&P Global Market Intelligence also found that Bed Bath & Beyond "was the most-shorted consumer discretionary stock" as of mid-August, with 38.61% short interest.
Bed Bath & Beyond has named Laura Crossen, its senior vice president of finance and chief accounting officer, as its interim chief financial officer.
Meanwhile, the company appears to be pivoting to a new strategy. In a Thursday note from investment firm Wedbush Securities, analysts wrote, "The company expects to make progress over the next several quarters in unwinding owned brand inventory while National brand penetration should also improve with each coming quarter."
That means "going back to basics," with a "more focused approach on the right assortment of national brands in key categories."
"We are encouraged by the strategic pivot that re-emphasizes the products and categories that have historically driven growth for the company, but not only do we expect several more 'noisy' quarters as BBBY makes this shift, but we see formidable challenges to regaining traction with lost customers," the analysts wrote.
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