Summary
- Rightsizing the Bed Bath & Beyond business means 20% reduction in force, 150 store closures.
- In the process, Bed Bath & Beyond has secured more than $500 in financing commitments and may issue as many as 12 million shares of its common stock.
- Though Bed Bath & Beyond has not yet identified the stores to be closed, we have identified the REITs who have BBBY on their tenant roster.
In the latest reminder that brick-and-mortar retail was struggling even before the pandemic, Bed Bath & Beyond Inc. ( BBBY ) on Wednesday announced strategic changes meant to strengthen its financial position, drive growth, and better serve their customers. Meme investors, already reeling from Ryan Cohen's sleight-of-hand stock sales on August 16 and 17, saw BBBY shares plunge another 21% in Wednesday trading.
We don't dabble in trading GameStop ( GME ) or AMC Entertainment ( AMC ) and have never even considered purchasing Bed Bath and Beyond shares, but, as real estate investors, we must be mindful of who the meme stocks landlords might be. As it turns out, retail real estate investment trusts ("REITs") own about 22% of BBBY's 770 stores.
During their 8/31 investor update call , CFO Gustavo Arnal responded to an inquiry about the identity of and pace of the 150 stores which will be closed by not really revealing anything.
"As it relates to cost structures, we continue to take necessary steps to rightsize our cost structure and store fleet. Organizationally, we will be flatter and more efficient with an expense base that aligns with business operations. We have begun a reduction in force, which includes approximately 20% across corporate and supply chain. We're also initiating an additional store fleet optimization program and identified approximately 150 underperforming stores."
" Operator: Our next question comes from Jonathan Matuszewski from Jefferies.
Jonathan Richard Matuszewski
My question was on store closures. Just, Gustavo, help us think about the cadence of those 150 store closures. When will those be complete? And anything you could share on the financial profile of those locations relative to the rest of the fleet would be helpful.
Gustavo Arnal
Yes. This is a program that we've gotten underway, as we mentioned, approximately 150 stores. We're working on the cadence of that. Probably 50 to 60 stores will be in the first wave later as we go in the balance of the fiscal year, and the rest will follow after. We're not sharing specific economics on those stores at this point, nor locations."
So, with the company providing no information as to which stores will close, we wanted to identify which REITs own BBBY stores and how many.
The table below indicates that Bed Bath and Beyond has relationships all across the retail REIT sector. Most have at least 1 BBBY storefront, but, fortunately, none are exposed to a dangerous extent.
Considering the % of Rental Revenue, Acadia Realty Trust ( AKR ) and RPT Realty ( RPT ) face the potential for pain coming in at 2.70% and 2.40%, respectively. By a property count measure, Kimco Realty ( KIM ), Kite Realty Group ( KRG ), Brixmor Property Group ( BRX ), and SITE Centers Corp. ( SITC ) own the most stores with more than 20 each. Seritage Growth Properties ( SRG ) owns 6 Bed Bath and Beyond stores, but its July decision to sell all assets and dissolve makes me think that BBBY isn't top of mind for them.
We Wait
We are long Armada Hoffler Properties ( AHH ) and Kite Realty, so our portfolio does have a little meme exposure here. Like all proud real estate companies, AHH and KRG would likely tell us that they have the best properties and that all retailers are fighting tooth and nail to get a lease with them. Until BBBY releases a closure list, however, we can just bide our time.
In the interim, I'll be watching the sale ads, trying to find a bargain on high thread count sheets.
For further details see:
Bed Bath & Beyond: Do Store Closures Pose REIT Fallout?