$11-B Stock Buyout Scheme Sinks Bed, Bath & Beyond

Bed, Bath & Beyond made plenty of mistakes that led to this week’s bankruptcy filing. Among the worst was the $11.8 billion it has spent since 2004 to buy back its own shares. Its repurchase program wasn’t unique.

Photo Insert: The $11.8 billion Bed, Bath & Beyond spent on its own stock since 2004 comes to more than twice the $5.2 billion in debt it had on its books in its most recent SEC filing.

But for a cash-starved business that announced it would likely be forced to close all of its stores if it couldn’t find an 11th-hour savior, the money could have been better spent. Instead, it fueled a failed effort to support its stock price, Chris Isidore wrote in an analysis for CNN.

The $11.8 billion Bed, Bath & Beyond spent on its own stock since 2004 comes to more than twice the $5.2 billion in debt it had on its books in its most recent SEC filing. It left the company unable to buy the inventory required to create the sales it needed to reverse losses.

“The company’s stewardship of their capital failed,” said Declan Gargan, retail director, and credit analyst at S&P Global Ratings. Bed, Bath & Beyond grew particularly active share repurchases in July 2014, taking on $2 billion in debt to finance share buybacks as it started to face pressure from activist shareholders to improve the stock’s performance.

The company had little debt up to that point and it put Bed, Bath & Beyond on a path toward a debt load that ultimately proved unaffordable. “We understand they have the equity shareholders to serve.

Generally, we would prefer to use their cash flow to invest back in business,” said Sarah Wyeth, the lead credit analyst for S&P. “Even M&A would be less risky than a straight share repurchase.”

Bed, Bath & Beyond engaged in a share repurchase program until February 2022, spending $230 million on shares in three months. It spent an average of $16.04 on each share.

But its efforts to support the stock price did little to help. Its stock plunged 83% last year, and another 88% so far this year before it closed at 29 cents a share on the Friday before the bankruptcy filing.

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