5 Retail Bankruptcies: Lessons Learned

BuyBuy Baby has experienced a significant decline in revenue in the last few years, reflecting the financial challenges faced by its parent company, Bed Bath & Beyond. In fiscal year 2021, BuyBuy Baby generated $1.4 billion in sales, accounting for 16% of Bed Bath & Beyond's total net sales of $7.9 billion. But in the second quarter of fiscal 2022, BuyBuy Baby reported double-digit declines in sales, reversing its earlier status as a rare bright spot for its parent company. This downturn was attributed to tough comparisons from the prior year, which had been bolstered by federal stimulus payments and higher birth rates. These revenue declines intensified financial pressures on BuyBuy Baby.

When Bed Bath & Beyond filed for bankruptcy on April 23, 2023, the company planned to auction off its BuyBuy Baby business and all its physical stores. But by July 2023, Bed Bath & Beyond’s plans changed and instead, it sold the intellectual property of BuyBuy Baby (including its store leases) to Dream On Me. BuyBuy Baby once had 120 stores across the US. But more recently, it announced plans to close all of its physical stores. There are several reasons being cited for this, including rising inflation, consumer hesitation and growing competition from Amazon and Target.

What do you look for when you look at a company business credit report? We’re big believers in looking at stats like a company’s DBT as a key metric to understand their financial situation. But look at Big Lots, who filed for bankruptcy on September 9th of this year. Between January and October 2024, their DBT averaged about 7 days, which was below the industry average of 12-16 during those months. Having a DBT of 7 isn’t worrying as it shows the company was paying its bills only about a week late. 

So, why did Big Lots end up filing for bankruptcy? While Big Lots’ DBT was consistently good, its revenue told a different story. In the first quarter of fiscal year 2024, their reported net sales totaled $1.009 billion – a 10.2% decrease from the same period a year earlier. President and CEO Bruce Thorn said the decline was, “due largely to a continued pullback in consumer spending by our core customers, particularly in high ticket discretionary items.” 

With inflation and the cost of living continuing to rise, many consumers simply don’t have the same spending power as they once did. And for a store like Big Lots that sold big-ticket items like home appliances, that shift in spending impacted their bottom line. 

There was a time when you’d be hard pressed to walk into a mall anywhere in the country without finding an Express clothing store. But the fast fashion retailer filed for bankruptcy in April 2024. Why?

Well, debt definitely had something to do with it. In 2023, the company took out a $65 million loan at a 15% interest rate, which CFO Jason Judd described as a “short-term measure to strengthen our liquidity position.” In the third fiscal quarter of 2023, the company reported their total debt was $274.7 million. To put that into perspective, in the same period in 2022, Express reported their debt as $235.4 million. 

So, what lesson can we take from 99 Cents Only’s bankruptcy filing? I think it’s telling that 99 Cents Only’s DBT fluctuated quite a lot in 2024. At the beginning of 2024, they were below the industry average – 5 in January and February and 7 in March. But as the year went on, not only did the company’s DBT increase, it started spiking erratically. In May 2024, for example, the company’s DBT was on par with the industry average DBT (12). Then in June, it dropped to 10. But in July 2024, 99 Cents Only’s DBT soared to 21 – meaning it more than doubled in a single month. It just goes to show you that you need to look beyond a credit score on a business credit report.