Signature Associates

Bed Bath & Beyond bankruptcy creates $5 billion opportunity for Target, Amazon

Posted By: The Detroit News on April 24, 2023.  For more information, please click here to read the source article.

Bed Bath & Beyond’s liquidation plan may weigh on one source of U.S. retail profits in the short term as the market is inundated with liquidated home and baby products — but it leaves a long-term prize of about $5 billion in annual revenue for competitors.

Once deep discounts from Bed Bath & Beyond’s and Buy Buy Baby’s closing sales are over, Target is a likely beneficiary, Piper Sandler analyst Edward Yruma said in a note to clients Monday. Target is in line for an eventual boost of about 40 cents a share to annualized earnings, he said. Amazon.com and Walmart will also pick up more sales.

“We believe that we are entering a new phase of retail industry consolidation and that Target and Walmart will be long-term share beneficiaries,” Yruma said.

The liquidation will accelerate market-share gains that rivals have been grabbing for years at Bed Bath & Beyond’s expense. Once lauded as a category killer in home furnishings, the retailer has watched as annual sales tumbled to a little more than $5 billion, down from more than $12 billion for the fiscal year ended in early 2019. After filing for bankruptcy protection over the weekend, Bed Bath & Beyond is winding down 360 stores and 120 Buy Buy Baby shops by June 30.

While Bed Bath & Beyond hasn’t reported results for its most recent fiscal year, sales in its fiscal fourth quarter fell by almost $1 billion, Holly Etlin, the company’s chief restructuring officer, said in a court filing. That would imply revenue of a little more than $1 billion for the period, bringing the annual total to approximately $5.2 billion. Bed Bath & Beyond estimated that aggregate net proceeds from all sales of its remaining goods will be approximately $718 million.

Minneapolis-based Target is positioned to get $500 million to $1 billion in extra sales thanks to the void left by Bed Bath & Beyond, said Michael Baker, an analyst at D.A. Davidson. That would still represent a relatively small part of the $19.5 billion that Target sold in home furnishings and decor in 2022, which was an off year for the category: Consumers pivoted away from discretionary goods last year after gorging themselves on such products when stuck at home for much of 2020 and 2021.

Smaller companies such as Williams-Sonoma Inc. will also benefit over the long term from Bed Bath & Beyond’s exit, Bank of America said in a report. Wayfair and Overstock.com will probably get a modest sales boost.

Bed Bath & Beyond said it’s still searching for a buyer for some or all of its assets, so some parts of its business may stick around in one form or another. A shutdown of Buy Buy Baby would leave the U.S. without a national retailer dedicated to selling baby goods, giving rival companies another category to potentially pounce on.

“There really is no one doing that, at least on a national scale,” Baker said, referring to baby-related merchandise. “That means opportunities for mom-and-pops and online solutions, although we never really knew the profitability of it.”