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Bed Bath & Beyond takes another hit with grim announcement

Stephen Cook Stephen Cook on January 30, 2023

Image source: USA Today

Bed Bath & Beyond: After experiencing yet another huge setback on Thursday, Bed Bath & Beyond announced a developing crisis.

The firm claimed that it lacked the money to pay its debts in full.

A dreadful bankruptcy notice was issued as a result of the company failing to make payments on its JPMorgan credit line.

Later on Thursday after hours, shares of Bed Bath & Beyond dropped, momentarily halting trading.

The market value of the shares dropped by 22% to close at about $295 million.

The news

In a securities filing, Bed Bath & Beyond stated that it lacked the funds to repay the debts secured by the Credit Facilities.

Without sufficient resources, the company might need to consider other options.

One of its options is to restructure its obligations in line with the US Bankruptcy Code.

Bed Bath & Beyond is now working to cut costs by doing a range of actions, like:

  • Closing stores
  • Lowering capital expenditures
  • Negotiating lease deals with landlords

The company did issue a warning, noting that the measures might not be successful.

Challenging times

Bed Bath & Beyond’s most recent filing is even more proof that the retail company’s time is running out as sales are underwhelming and debts are piling up.

Additionally, it occurs amid a time of economic change when inflation has been putting a pressure on consumers’ budgets.

Furthermore, people are spending more on leisure and travel than on household goods.

Bed Bath & Beyond also experienced problems because it required early payments in the second quarter of its fiscal year, which resulted in a reduction in credit limits and tightening of credit conditions.

According to the filing, they prevented the company from adequately storing goods in advance of the holiday season.

Additionally, Bed Bath & Beyond made clear that suppliers had to make prepayments.

Read also: Geoff Morrell received 6 figures in his brief Disney run

Debt

The outstanding balance on the asset-backed loan with JPMorgan is $550 million.

In addition, as a result of the credit facility’s expansion in August 2022, Bed Bath & Beyond owes Sixth Street $375 million.

The amount of unsecured notes included in the company’s debt is around $1.2 billion.

The notes have been trading at depreciated prices as of their maturity dates, which are spread throughout 2024, 2034, and 2044.

Bed Bath & Beyond informed investors that it expected to utilize more credit to cover its obligations less than a month later, but then stated that the company was unable to restructure part of its debt.

The business has recently made large spending.

Bed Bath & Beyond made cash payments totaling $890 million on Thursday for the nine months that came to an end on November 26.

The company stated that as of that time, it still had $225.7 million in cash.

Early warning

Earlier this month, Bed Bath & Beyond warned that the company was considering filing for bankruptcy owing to a shortage of funds.

Sales were lower than expected, which increased the risk that the company wouldn’t have enough cash on hand to cover its expenses.

At the time, CEO Sue Gove stated that revamping Bed Bath & Beyond and ensuring that its brands remained the top choice with consumers were the company’s top priority.

The Thursday update follows Bed Bath & Beyond’s “going concern” warning about not being able to fulfill payments after the worse-than-expected quarter.

Other options

Recently, Bed Bath & Beyond has began exploring options.

In case it needs to file for bankruptcy, the company is considering finding funding to keep it afloat.

The firm is currently undergoing a sales process in an effort to attract a buyer and support keeping its doors open for large chains.

In case it becomes necessary to file for bankruptcy, Bed Bath & Beyond is also searching for lenders who may provide funding to keep the company afloat.

“Multiple paths are being explored, and we are determining our next steps thoroughly, and in a timely manner,” a spokeswoman said last week.

Sycamore Partners, a private equity firm, has shown an interest in buying the company.

The corporation is intrigued by Buybuy Baby, which has outperformed the larger company.

Future survival of Buybuy Baby is anticipated, according to sources.

Geoff Morrell received 6 figures in his brief Disney run

Ken Jacobs Ken Jacobs on January 30, 2023

Geoff Morrell: The normal salary for top executives, such as CEOs and C-level executives, is quite high, and they typically earn significant bonuses and other types of incentives.

Top executives often earn millions of dollars annually, although the specific amount might vary greatly based on the firm, industry, and location.

Many top executives furthermore obtain stock options and other kinds of equity pay, which can ultimately increase their wealth.

Being a senior executive at a corporation of Disney’s magnitude comes with a lot of responsibilities.

Early in 2022, Disney employed Geoff Morrell as its top corporate affairs officer, but he left after only a few months.

Despite his short tenure, Morrell managed to make an astonishing six figures during the three months he was in charge.

How much he made

Depending on the organization, sector, and location, a Chief Corporate Affairs Officer’s (CCAO) pay might differ significantly.

The average annual pay for a CCAO in the United States is roughly $150,000, according to statistics from Glassdoor.

However, depending on variables like the company’s size and sector, this might differ dramatically.

For instance, a CCAO employed by a big, publicly listed business in a major city would get a much greater pay than a CCAO employed by a smaller, privately held business in a remote location.

However, The Wall Street Journal reported that Geoff Morrell, who oversaw Disney’s public relations and political affairs staff, earned a substantial $150,000 per day.

Additionally, it was disclosed in a Disney filing from last week that he collected $8.3 million in pay and incentives.

The sum covers both his five months on the payroll and his three months in the post.

Although his resignation was announced in late April 2022, Geoff Morrell’s last day as CCAO was June 30, 2022.

He was appointed on January 24, 2022.

Breaking down the sum

When Geoff Morrell accepted the CCAO post, his compensation package included $537,438 to help him move his family out of London.

For his “special predicament” to move the family back following his release, he was given an additional $500,000.

A Disney employee claims that Morrell received $2 million less than the filing’s reported $8.3 million salary.

Due to his short tenure, performance-based rewards were not given, which resulted in the lesser compensation.

Read also: Pandemic aftermath incurs layoffs with shifting customer demand

However, Morrell’s compensation numbers did not include an extra benefit.

Many believe that Disney’s $4.5 million acquisition of the house would lessen the impact of the market’s cooling.

The house is still on the market as of October.

Disney will take everything it can get for the house.

Furthermore, Disney gave Morrell his initial purchase price back, although this isn’t counted as part of his pay in the filing.

Additional Disney payouts

Disney continues to take additional steps to fulfill Geoff Morrell’s contract despite having previously spent a significant amount of money on him.

The remaining $4 million of the former Disney CCAO’s contract will be paid to him during the current fiscal year, which ends on October 1.

The target bonus that Morrell would have gotten last year will likewise be given to him.

The $8.3 million in salary for 2022 includes the extra $4 million.

The overall compensation for Geoff Morrell is $10.3 million. 

The unvested $2 million performance incentive and the upcoming $4 million have already been taken into account.

Morrell made almost $148,000 per day (if just workdays are considered) between his employment and April’s departure, or $108,000 if he worked seven days a week.

PR problems

Geoff Morrell spent more than ten years on the BP PR team before joining Disney.

Morrell served as the executive vice president of advocacy and public relations for the last 17 months.

He had previously guided the business through the Deepwater Horizon incident and the ensuing oil spill.

Disney handled a PR issue shortly after he joined the media company.

The corporation received harsh criticism once Florida’s parental rights legislation was incorporated into school law.

Through the third grade, gender identity and sexual orientation instruction are forbidden by the bill.

Additionally, it limits the kinds of information on the subjects that are available to older kids.

Under the leadership of new CEO Bob Chapek, Disney made an effort to skirt the law.

It only angered a few Disney employees, however.

Chapek’s criticism of the measure infuriated Republican lawmakers in Florida as Governor Ron DeSantis of Florida.

As a result, Disney lost the authority it had had for many years to govern the area around its theme park in Orlando.

Days later, Geoff Morrell was discharged.

Morrell

Geoff Morrell found himself in another prestigious job after leaving Disney.

He was appointed president of Teneo’s worldwide strategy and communications earlier this month. Teneo is a global CEO advising organization.

Meanwhile, Bob Chapek was let go by Disney in November, and Bob Iger made a comeback.

Chapek enjoyed a profitable period.

He received a severance payout worth nearly $20 million in addition to the $24 million he received in 2022, according to a regulatory filing made last week.

Pandemic aftermath incurs layoffs with shifting customer demand

Karla Perry Karla Perry on January 30, 2023

Image source: LinkedIn

Pandemic: According to CEO Satya Nadella, the pandemic’s start two years ago swung the scales in Microsoft’s favor.

Microsoft prospered through its online services.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said Nadella.

The scenario is substantially different from what it was in 2021 as of this year.

Microsoft announced last week that 10,000 workers will be laid off.

The business said that as it battles with economic instability, it is reevaluating its digital spending from the pandemic era.

Microsoft users want to do “more with less,” as per Nadella.

The tech space

Microsoft is not the only business to go through this process; other businesses have also been getting rid of employees.

Alphabet, the parent firm of Google, has disclosed intentions to terminate 6% of its employees (over 12,000 jobs).

Around 50,000 employees have been let go by many massive corporations, including Amazon, Google, Meta, and Microsoft, since October.

The decisions stand in contrast to the pandemic’s early stages, when tech businesses were growing to meet the demands.

Many market players at the time believed the expansion was going to last a very long time.

However, Amazon has more than doubled its employees since roughly September 2019.

They built additional warehouses while employing over 500,000 workers.

Between March 2020 and September of the prior year, the workforce of the massive social media company Meta more than doubled.

Other businesses that have increased their worker numbers are:

  • Google
  • Microsoft
  • Salesforce
  • Snap
  • Twitter

In recent weeks, the aforementioned businesses have also announced further layoffs.

Read also: United Airlines estimates are positive despite increased fare

Error in judgment

The spread of the pandemic was underestimated by the majority of tech CEOs, especially as individuals returned to their normal lives and offices.

Consumer spending and advertising have decreased recently for a number of reasons, including:

  • Recessionary fears
  • Inflation
  • Increasing interest rates

Some companies, according to Wall Street experts, will have single-digit profit growth in the crucial December quarter.

Apple and Meta are anticipated to experience declines, according to Refinitiv forecasts.

Most recently implemented personnel reductions often only impact a tiny portion of the whole workforce.

Others cut gains over the previous year despite keeping tens of thousands (or perhaps hundreds of thousands) of employees.

However, because of their company’s allegedly endless expansion, it interferes with the lives of employees who are now looking for new employment.

Pandemic growth

The Third Bridge investment firm’s worldwide sector lead, Scott Kessler, gave his thoughts on the state-of-the-art advances and early expansion of the tech industry.

“They went from being on top of the world to having to make some really tough decisions,” said Kessler.

“To see this dramatic reversal of fortunes… it’s not just the magnitude of these moves, but the speed that they’ve played out.”

“You’ve seen companies make the wrong strategic decisions at the wrong times.”

Apple continues to be the only significant technology business without any public layoffs.

According to reports, the company suspended recruiting, with the exception of R&D (research and development).

Apple has barely increased employment by  more than 20% over the past four years compared to other corporations.

“They’ve taken a more seemingly thoughtful approach to hiring and overall managing the company,” noted Kessler.

Meanwhile, CEOs have admitted that they made an error by recruiting too many people at the start of the pandemic and failed to anticipate demand that came when the restrictions on the pandemic were lifted.

He issued an email to the staff on Friday, and it was later published on the company website.

“The face that these changes will impact the lives of Googlers weighs heavily on me,” Pichai wrote.

“I take full responsibility for the decisions that led us here.”

Aftermath

The titles and compensation of the major corporate CEOs don’t appear to have changed as a result of the reductions.

Despite all the worries about the economy, Scott Kessler forecasts that the tech industry will likely continue layoffs throughout the approaching earnings season.

Businesses that haven’t yet felt these repercussions may decide to do so in the near future by laying off employees.

Kessler observed:

“I think there is an element of [some companies], saying ‘We might not see this right now but all these other big companies, these companies that we compete with, that we know, that we respect, are taking these kinds of actions, so maybe we should be thinking and acting accordingly.”