Bed Bath & Beyond’s Collapse Draws Suitors for Buybuy Baby

While sales at both chains are shrinking, the smaller baby business has held up better than the home goods chain. The company is still opening new Buybuy Baby stores, even as it closes 150 of its namesake locations and moves to preserve cash. As of February 2022, the company had about 770 Bed Bath & Beyond stores and about 130 Buybuy Baby locations. 

The Buybuy Baby business has drawn more interest than the core Bed Bath & Beyond business, the people said, and some discussions with potential suitors have centered around keeping the Buybuy Baby locations intact while determining another path forward for Bed Bath & Beyond. It’s unclear what that could look like. 

The board of Bed Bath & Beyond explored a potential sale of Buybuy Baby last year under pressure from activist investor

Ryan Cohen.

It decided not to sell the business because the separation would be complicated and costly and the new leadership team needed to nail down a strategy for the business before marketing it to potential bidders, the people said. 

It isn’t clear what price the company was hoping to fetch in 2022 versus today.

Cristina Fernandez,

an analyst with Telsey Advisory Group, estimated that the baby chain had about $1.2 billion in sales last year and is probably worth about $300 million to $400 million.

As its financial results have deteriorated, the company warned this month about its ability to remain in business and set plans for more layoffs. The company had a net loss of $1.12 billion on revenue of $4.16 billion for the nine months ended Nov. 26. It doesn’t break out profit or revenue for the Buybuy Baby business. 

Comparable-store sales at BuyBuy Baby fell by a high-teen percentage in the latest quarter compared with a year ago, compared with a 28% decline at Bed Bath & Beyond stores, which sell kitchen appliances, bedding and other home goods. 

Ms. Fernandez said the baby chain’s sales have held up better because it still sells mostly branded goods like Gerber food and

Graco

strollers, and it wasn’t affected as much by the shift to private-label goods that hurt Bed Bath & Beyond.

Sycamore Partners has been an active buyer of distressed retail chains. It led the roughly $6.9 billion leveraged buyout of Staples in 2017 and made an unsuccessful bid for department store chain

Kohl’s Corp.

last year. The New York firm has also scooped up mall-based chains such as Ann Taylor, Express and The Limited. Sycamore often buys struggling retailers, sells off their most valuable pieces and cuts costs at whatever remains, sometimes using the savings to extract dividends. 

Any deal for BuyBuy Baby would be part of the expected chapter 11 restructuring process, according to the people familiar with the matter. Shares of Bed Bath have surged this week, more than doubling to around $5, even though equity holders would likely be wiped out in a chapter 11 filing. 

The company faces a Feb. 1 interest payment on its existing debts that will be a test of whether it will stay current on its debts or conserve cash as it charts its course. The notes are trading under 10 cents on the dollar, reflecting investors’ expectations that the company won’t pay the debt back in full.