A decade ago, Bed Bath & Beyond was a brick-and-mortar star with a $16 billion market cap. With interest rates at near-zero for a decade, the company went on an acquisition binge, buying up companies such as Cost Plus World Market in 2012 and Decorist in 2017. Yet the big-box retailer was slow to adapt to the e-commerce era, according to a Wall Street Journal editorial. Target, Walmart, Home Depot and Lowe’s invested in improving their online and logistics operations, which enabled them to better compete with Amazon. Bed Bath & Beyond’s failure to do so was costly during the COVID government lockdowns as it racked up billions of dollars in losses. Investors indulged such losses as long as the Fed maintained its uber-accommodative policies, which made borrowing cheap and fueled speculative stock-buying. Bed Bath & Beyond’s stock price doubled between January 2020 and 2021 to $35 a share amid a rally in so-called meme stocks such as AMC and GameStop. But credit conditions tightened last year as the Fed raised rates, spurring the retailer last August to close 150 stores and cut its workforce by 20%. The belt-tightening enabled it to secure a $375 million loan to continue operating through the holidays, but it continued to struggle and reported another sales drop in the latest quarter. By the end of March, its market valuation had slumped to $70 million and its stock price had fallen below a dollar. The company could no longer raise capital or borrow to stay afloat, making bankruptcy all but inevitable. Thousands of workers may lose their jobs, but the good news is that plenty of companies are still hiring. Nobody celebrates a corporate bankruptcy and the human and financial harm that goes with it. But some companies inevitably fail in a dynamic economy, and the demise of unprofitable businesses enables labor and capital to move to more productive uses. Propping up so-called zombie companies suppresses economic growth and innovation. Read more. (Subscription required.)
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
