Toys ‘R’ Us specter looms over Bed Bath & Beyond

Maura Webber Sadovi

The home-goods retailer’s mixed signals remind some of Toys “R” Us. The toy retailer filed to reorganize in 2017, only to liquidate its U.S. operations months later.

Home-goods retailer Bed Bath & Beyond is sending mixed signals by filing a Chapter 11 bankruptcy over the weekend while simultaneously moving to close its 475 remaining brick and mortar stores, analysts say. 

Under Chapter 11 of the U.S. Bankruptcy Code that Bed Bath & Beyond chose, companies seek to stay in business by working with creditors to restructure their debt. In contrast, a filing under Chapter 7 of the code is a liquidation for scenarios where profitability isn’t a possibility and in such cases the company’s operations are terminated and a trustee takes control “to ensure creditors benefit from the maximum value of the debtor’s assets,” according to Cornell Law School’s Legal Information Institute.

The storied Union, New Jersey-based company’s next steps seem to be straddling the two bankruptcy scenarios but that’s not altogether unusual, according to analysts. In 2017, Toys “R” Us, another high profile Garden State-based retailer, filed for Chapter 11, aiming to restructure its debt and keep operating only to announce about six months later that it would wind down its U.S. operations, as previously reported by Industry Dive sister publication Retail Dive. 

Most businesses file for Chapter 11 and try to keep operations going in some form in order to keep some money and customers coming in the door, according to Rick Watson, CEO and founder of RMW Commerce Consulting, a retail and e-commerce consulting firm based in New York City. That’s why Watson, who didn’t rule out the possibility of the company ending up in liquidation, was a little confused to hear Bed Bath & Beyond was already moving to close stores.

Still, he maintains that there’s “better than even odds” that Bed Bath & Beyond will restructure in Chapter 11 or at least be able to sell some of its assets such as its real estate, technology and brand names at a market price rather than move to a liquidation situation in which assets will fetch lower values. Chapter 7 is a much more drastic and less attractive option for companies, he said. 

“As soon as you file Chapter 7 everything stops,” Watson said in an interview, noting that the trustee steps in and takes the control from management and vendors typically have a much harder time getting paid. “Once you shut it down then everyone goes home and it’s very hard to get it running again.”