Without profits, it is too difficult to survive in the long term. Having a negative operating margin means the company is losing money from the core business operations. The business thus has a high chance of becoming insolvent. If shareholders' equity remains negative for a significant amount of time, the company faces a risk of being unable to pay any off its debts even if it finds a buyer to acquire it. Negative equity means the company, if sold, owes more than what it is worth, which is not a good scenario for its shareholders. Equity is the balance when subtracting liabilities from assets. What this means is that the shareholders equity was negative, or in other words, the net worth of the company was also negative. Red signal 2: Debt-to-equity ratio was negativeįor the same quarter mentioned above, the company had a debt-to-equity ratio of -4.55. According to the lastest earnings results, the company had a current ratio of 0.73. A company with a current ratio of less than 1.00 means that it does not have the required capital to meet its short-term obligations. The current ratio is a liquidity ratio that is calculated as current assets divided by current liabilities. Red signal 1: Current ratio less than 1.0
Next, let's take a look at five of the main financial red signals that could have helped predict when Bed Bath's balance sheet finally reached the breaking point.
In the fiscal year 2020, which ended in February 2021, the company reported net sales of $9.2 billion, a 24% decrease from the previous fiscal year. However, increased competition from online retailers and changing consumer shopping habits continued to bite. This sale was part of the company's ongoing efforts to streamline its operations and focus on its core business.ĭespite the declining sales that resulted in so many cost-cutting measures, Bed Bath continued to operate its remaining stores and e-commerce website for a while.
#BED BATH AND BEYOND HOUR SERIES#
The company also announced a series of cost-cutting measures, including reducing its corporate workforce and optimizing its supply chain operations.Īdditionally, in October 2020, Bed Bath completed the sale of its business to (NASDAQ:FLWS) for $252 million. In July 2020, Bed Bath announced that it would be closing approximately 200 stores over the next two years. What made Bed Bath so different? Let's take a closer look at the comopany's situation and its financials to identify the key signs that predicted the bankruptcy. However, there are quite a few companies on the market with financial metrics that look even worse than Bed Bath's on paper, and yet they still manage to function year after year. As a result, the company has implemented several strategic initiatives, such as store closures and cost-cutting measures, in an effort to improve its financial performance. It has faced some financial challenges in recent years, including declining sales and profits. In hindsight, it's easy to see why the company went bankrupt. Warning! GuruFocus has detected 3 Warning Signs with BBBY. The company was founded in 1971 and is headquartered in Union, New Jersey. For many of the harder to find home good, Bed Bath was the go-to before e-commerce grew in popularity. The annoucement came on April 23.īed Bath & Beyond is a retail chain that specializes in home goods, decor, furniture and a wide variety of other home goods. Bed Bath & Beyond (NASDAQ:BBBY) has finally filed for bankruptcy after a long fight to stave it off, stating that it has made the difficult decision to begin winding down its operations.
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