Breaking Down What Bed Bath & Beyond's Bankruptcy Means for Consumers

Michael Felice, associate partner at Kearney, joined Cheddar News to talk about Bed, Bath &amp; Beyond's bankruptcy filing and the implications it will not only have the business but what it means for consumers.&nbsp; "But for consumers, I wouldn't really throw away those gift cards or coupons yet. There's still likelihood that those gift cards still will work for an extended period of time," he said.

Closing Bell

The bed bath and beyond bankruptcy announcement over the weekend as the struggling retailer says it is planning to wind down its operations but that its stores will remain open for now. Joining me for what this means for our customers competitors. The company itself is Michael Felice, associate partner and car, communications, media and technology practice, Michael. Thank you for coming on the show. What does this mean? Well, great to be here. Yeah, thank you so much. You know, I started my early career in bankruptcy and now do a lot of critical turnarounds at Carney. And really what it means is there's two formal types of bankruptcy. Uh Chapter seven and chapter 11, this looks like it will likely be a liquidating 11, meaning that the creditors believe the debtors can extract more value out of the remaining merchandise than a simple wind down. But for consumers wouldn't really throw away those gift cards or coupons. Yet there's still likelihood those gift cards still will work for an extended period of time and some portion of time where those great 20% off coupons can be used on merchandise moving forward. Is this a time Michael even you know, the well known 20% off coupon aside where shoppers can get some really big deals as the company is starting to wind down. Yeah, you will likely see, uh, moving into a liquidating 11, which is likely where they're moving discounts up to 30 and 50% off of most of their merchandise when the assortment is still fairly full. And so that's when they'll move away from taking those 20% coupons likely, and ultimately, you'll get down to 80 90 95% discounts. But the bulk of the store will be kind of liquidated or sold off by that time. So it's kind of get in there for the things you really knew you wanted and then maybe hold out for some bargain buys at the very end. Interesting. Ok, so the company says it is looking for a buyer, Michael. Uh what would be the next step in that process? And, and do you think there would be a potential buyer interested? Yeah, there are um investors that specialize in this space, uh and actually come in during this process and buy out whether it's portions or certain assets. You know, they hold some specific brands that consumers have come to love. Uh ever home being one. They also have a number of other lines or buy, buy baby and World market that could still have some strong year over year sales and some value uh to investors as well as consumers So it'd be very interesting to see how this plays out again. I think that's why they went with a liquidating 11 instead of a seven, handing it over to a trustee and a seven really selling off all the the assets as opposed to in the 11, it gives them the optionality to keep some things alive for their customer base and really extract as much value out as they can. So another question that I have is we're showing, I mean, all the images of this real estate, right? This this company has a lot of real estate and that obviously can be a value here. What would happen with this real estate and then also an ecommerce presence trying to move this perhaps strictly online. What do we know about what might happen in the future of these physical stores? Yeah. Well, omnipresent and omni channel is where we're seeing most retail moves. So very good point on trying to how can we move this to a direct to consumer uh type of business a little bit more. You'll see a lot of these special investors looking at the optionality there. I think something else to take note they've been going through a transformation for quite some time with their debt covenants coming very close. And so you should have seen a lot of sale leasebacks on this property, most of them being operating leases and not own property. So most of these will fall as unsecured claims moving out in the bankruptcy process, but it will open up a lot of great commercial real estate for other retailers who should be looking at. Is there a spot or did one of these locations really drive a change to drive for their customer base as well? What about IKEA Michael? I mean, the timing of this is interesting because IKEA despite interest rates relatively high here in the United States, a potential recession on the horizon, IKEA is set to make its biggest investment ever in us markets across a variety of locations and it seems like there might be some overlap in customer base. Yeah, definitely. I mean, I think very well positioned in the diy market, right for home furniture and looking for value right now, consumers are looking for convenience and value overall. I mean, you're seeing movements across the board interaction becoming the new transaction today and a company like IKEA well positioned with their consumer base and their product as well as increasing their digital presence. And I think you really see them start to take off the tightening of the wallet and the value is there. And so consumers should flop to brands like IKEA. All right, Michael Felice, associate partner at Carney Michael. Thank you an important story for our viewers.