The bed bath and beyond bankruptcy announcement over the weekend
as the struggling retailer says it is planning to wind
down its operations but that its stores will remain open
for now. Joining me for what this means for
our customers competitors. The company itself is Michael Felice
, associate partner and car, communications, media and
technology practice, Michael. Thank you for coming on
the show. What does this mean? Well,
great to be here. Yeah, thank you so
much. You know, I started my early career
in bankruptcy and now do a lot of critical turnarounds
at Carney. And really what it means is there's
two formal types of bankruptcy. Chapter seven and chapter
11. This looks like it will likely be a
liquidating 11, meaning that the creditors believe the debtors
can extract more value out of the remaining merchandise than
a simple wind down. But for consumers wouldn't really
throw away those gift cards or coupons. Yet there's
still likelihood those gift cards still will work for an
extended period of time and some portion of time where
those great 20% off coupons can be used on merchandise
moving forward. Is this a time Michael? Even
you know the well known 20% off coupon aside where
shoppers can get some really big deals as the company
is starting to wind down. Yeah, you will
likely see, uh, moving into a liquidating 11
which is likely where they're moving discounts up to 30
and 50% off of most of their merchandise when the
assortment is still fairly full. And so that's when
they'll move away from taking those 20% coupons likely,
and ultimately, you'll get down to 80 90 95%
discounts. But the bulk of the store will be
kind of liquidated or sold off by that time.
So it's kind of get in there for the things
you really knew you wanted and then maybe hold out
for some bargain buys at the very end. Interesting
. Ok, so the company says it is looking
for a buyer, Michael. Uh what would be
the next step in that process? And, and
do you think there would be a potential buyer interested
? Yeah, there are um investors that specialize in
this space uh and actually come in during this process
and buy out whether it's portions or certain assets.
You know, they hold some specific brands that consumers
have come to love. Uh ever home being one
. They also have a number of other lines or
buy, buy baby and World market that could still
have some strong year over year sales and some value
uh to investors as well as consumers. So it'd
be very interesting to see how this plays out again
. I think that's why they went with a liquidating
11 instead of a seven, handing it over to
a trustee in a seven. Really selling off all
the, the assets as opposed to in the 11
, it gives them the optionality to keep some things
alive for their customer base and really extract as much
value out as they can. So another question that
I have is we're showing, I mean, all
the images of this real estate, right? This
this company has a lot of real estate and that
obviously can be a value here. What would happen
with this real estate and then also an ecommerce presence
trying to move this perhaps strictly online. What do
we know about what might happen in the future of
these physical stores? Yeah. Well, omnipresent and
omni channel is where we're seeing most retail moves.
So very good point on trying to how can we
move this to a direct to consumer uh type of
business a little bit more. You'll see a lot
of these special investors looking at the optionality there.
I think something else to take note they've been going
through a transformation for quite some time with their debt
covenants coming very close. And so you should have
seen a lot of sale leasebacks on this property,
most of them being operating leases and not own property
. So most of these will fall as unsecured claims
moving out in the bankruptcy process, but it will
open up a lot of great commercial real estate for
other retailers who should be looking at. Is there
a spot or did one of these locations really drive
a change to drive for their customer base as well
? What about IKEA Michael? I mean, the
timing of this is interesting because IKEA despite interest rates
relatively high here in the United States, a potential
recession on the horizon, IKEA is set to make
its biggest investment ever in us markets across a variety
of locations and it seems like there might be some
overlap in customer base. Yeah, definitely. I
mean, I think very well positioned in the diy
market, right for home furniture and looking for value
right now. Consumers are looking for convenience and value
overall. I mean, you're seeing movements across the
board interaction becoming the new transaction today and a company
like IKEA well positioned with their consumer base and their
product as well as increasing their digital presence. And
I think you'll really see them start to take off
the tightening of the wallet and the value is there
. And so consumers should flop to brands like IKEA
. All right, Michael Felice, associate partner at
Carney Michael. Thank you an important story for our 00:04:39.494 --> viewers.