WEBVTT 00:00:00.000 --> 00:00:02.120 Alright, so I want to start today by asking you 00:00:02.120 --> 00:00:04.910 to do something. picture it for a second. I want 00:00:04.910 --> 00:00:07.230 you to mentally open that one drawer in your 00:00:07.230 --> 00:00:09.189 kitchen. We all have it. You know, the one. Oh, 00:00:09.210 --> 00:00:11.169 yeah. The junk drawer. The junk drawer. Exactly. 00:00:11.449 --> 00:00:14.830 The place where, you know, AA batteries go to 00:00:14.830 --> 00:00:17.690 die and you've got rubber bands, takeout menus 00:00:17.690 --> 00:00:19.730 from restaurants that closed three years ago. 00:00:19.809 --> 00:00:22.190 All the unidentifiable keys. Exactly. The keys 00:00:22.190 --> 00:00:24.750 to who knows what. I want you to dig through 00:00:24.750 --> 00:00:27.350 that mental drawer for a second. Push aside the 00:00:27.350 --> 00:00:30.750 dried out pens and tell me what you see at the 00:00:30.750 --> 00:00:33.679 very, very bottom. It's big. It's glossy and 00:00:33.679 --> 00:00:38.079 it is definitely blue. It is the oversized blue 00:00:38.079 --> 00:00:41.359 20 percent off coupon. I mean, it might be the 00:00:41.359 --> 00:00:44.079 single most recognizable piece of direct mail 00:00:44.079 --> 00:00:46.039 in American history. Without a doubt. I don't 00:00:46.039 --> 00:00:48.140 think anything else even comes close. For decades, 00:00:48.280 --> 00:00:51.140 that coupon wasn't just a discount. It was practically 00:00:51.140 --> 00:00:53.679 a secondary currency. It really was. It was a 00:00:53.679 --> 00:00:55.899 cultural artifact. You didn't just go shopping 00:00:55.899 --> 00:00:58.619 for home goods. You waited. You waited until 00:00:58.619 --> 00:01:01.020 you had the big blue in your hand. It was a whole 00:01:01.020 --> 00:01:03.450 ritual. It was a phenomenon. You know, in the 00:01:03.450 --> 00:01:05.569 marketing world, we study that coupon. It's a 00:01:05.569 --> 00:01:07.769 case study. It's one of the most effective tools 00:01:07.769 --> 00:01:10.530 ever, ever created to drive foot traffic into 00:01:10.530 --> 00:01:12.969 a store. It was brilliant. Until, of course, 00:01:13.030 --> 00:01:15.170 it became the thing that helped kill the company. 00:01:15.500 --> 00:01:17.420 And that is exactly where we are going today. 00:01:17.500 --> 00:01:20.400 We are doing a deep dive into the retail giant 00:01:20.400 --> 00:01:23.480 that just flooded our mailboxes for, what, 30 00:01:23.480 --> 00:01:26.480 years? The company that seemed absolutely invincible. 00:01:26.799 --> 00:01:29.879 The category killer that defined how an entire 00:01:29.879 --> 00:01:32.099 generation set up their dorm rooms and their 00:01:32.099 --> 00:01:34.739 first apartments. We are talking about Bed Bath 00:01:34.739 --> 00:01:36.959 & Beyond. But this isn't just a, you know, a 00:01:36.959 --> 00:01:39.599 nostalgia trip. Because today is Saturday, February 00:01:39.599 --> 00:01:43.340 14th, 2026. And the story of Bed Bath & Beyond 00:01:43.340 --> 00:01:46.810 has become... Well, it's become incredibly complicated. 00:01:47.049 --> 00:01:49.390 It really has. It's a ghost story, it's a financial 00:01:49.390 --> 00:01:52.230 thriller, and a zombie movie all rolled into 00:01:52.230 --> 00:01:54.530 one. That's a perfect way to put it. I mean, 00:01:54.530 --> 00:01:55.989 just think about the reality we're living in 00:01:55.989 --> 00:01:59.030 right this second. If you drive to your local 00:01:59.030 --> 00:02:01.689 strip mall in the U .S. today, the Bed Bath & 00:02:01.689 --> 00:02:04.890 Beyond store, it's gone. It's been gone for years 00:02:04.890 --> 00:02:08.469 now. It's been gone since 2023. Maybe it's a 00:02:08.469 --> 00:02:10.849 gym now. Maybe it's a spirit Halloween that pops 00:02:10.849 --> 00:02:13.409 up once a year. Or just a big, empty concrete 00:02:13.409 --> 00:02:17.150 shell. Right. But if you go online, it's there. 00:02:17.289 --> 00:02:19.930 If you go to Mexico, it's there. And this is 00:02:19.930 --> 00:02:22.229 the part that just blows my mind. If you're listening 00:02:22.229 --> 00:02:24.569 to us from Canada or the UK, you might actually 00:02:24.569 --> 00:02:26.590 be seeing physical stores opening up again this 00:02:26.590 --> 00:02:29.590 year. It is the brand that refuses to die. The 00:02:29.590 --> 00:02:32.349 corporate body, you know, the actual company, 00:02:32.590 --> 00:02:35.389 it completely disintegrated. But the spirit, 00:02:35.449 --> 00:02:38.289 or at least the logo, it just keeps finding new 00:02:38.289 --> 00:02:41.550 hosts to possess. So here is our mission for 00:02:41.550 --> 00:02:43.889 this deep dive. We are going to unpack the entire 00:02:43.889 --> 00:02:46.270 life cycle of this absolute beast of a company. 00:02:46.389 --> 00:02:48.810 We're going to go all the way back to 1971. We 00:02:48.810 --> 00:02:50.789 want to understand how two guys from a discount 00:02:50.789 --> 00:02:53.590 chain basically reinvented retail. And we'll 00:02:53.590 --> 00:02:55.270 look at the golden era. I mean, the period where 00:02:55.270 --> 00:02:57.110 they just completely crushed the competition. 00:02:57.370 --> 00:02:59.090 But then we have to look at the collapse. And 00:02:59.090 --> 00:03:01.469 I don't mean just, oh, sales went down. We need 00:03:01.469 --> 00:03:03.229 to get into the weeds of the financial engineering. 00:03:03.330 --> 00:03:06.030 We have to talk about stock buybacks. We really 00:03:06.030 --> 00:03:08.090 do. We need to explain something called death 00:03:08.090 --> 00:03:11.379 spiral financing. It's as bad as it sounds. We 00:03:11.379 --> 00:03:13.979 need to understand how a Fortune 500 company 00:03:13.979 --> 00:03:16.699 can spend billions and billions of dollars on 00:03:16.699 --> 00:03:19.280 itself and just end up with nothing. And then 00:03:19.280 --> 00:03:21.300 finally, we're going to map out this completely 00:03:21.300 --> 00:03:24.580 fractured afterlife. You know how Overstock .com 00:03:24.580 --> 00:03:26.759 is now wearing the skin of Bed Bath & Beyond, 00:03:27.039 --> 00:03:29.740 the tragedy of Bye Bye Baby, and this brand new 00:03:29.740 --> 00:03:32.719 2026 revival plan that's happening as we speak. 00:03:32.939 --> 00:03:35.659 So grab your shower caddy, grab your dorm room 00:03:35.659 --> 00:03:38.300 bedding, and let's get into it. Let's do it. 00:03:38.639 --> 00:03:41.280 Okay, so to really understand how massive this 00:03:41.280 --> 00:03:43.180 thing got, we have to understand the world before 00:03:43.180 --> 00:03:46.259 it existed. We're going back to 1971. A different 00:03:46.259 --> 00:03:48.460 world. Completely. Nixon is in the White House. 00:03:48.740 --> 00:03:50.879 Disney World just opened its doors in Florida. 00:03:51.199 --> 00:03:53.479 And the way people shop for their homes was... 00:03:53.740 --> 00:03:55.199 It was just totally different. Oh, completely. 00:03:55.400 --> 00:03:57.819 I mean, think about it. In 1971, if you needed, 00:03:57.900 --> 00:04:01.099 say, towels, sheets, or maybe a toaster, where 00:04:01.099 --> 00:04:03.259 did you go? A department store. You went to a 00:04:03.259 --> 00:04:06.780 department store. A Sears, a Macy's, maybe a 00:04:06.780 --> 00:04:09.120 JCPenney. Or you went to some generic discount 00:04:09.120 --> 00:04:11.400 store. And what was that experience like? I mean, 00:04:11.400 --> 00:04:13.500 I'm imagining it was pretty limited. Limited 00:04:13.500 --> 00:04:16.019 is the key word. The entire department store 00:04:16.019 --> 00:04:19.639 model was based on curation. Some buyer at a 00:04:19.639 --> 00:04:21.439 corporate headquarters in New York or Chicago 00:04:21.439 --> 00:04:25.389 decided what was In style. So you'd walk into 00:04:25.389 --> 00:04:27.089 the towel section and you'd have, what, maybe 00:04:27.089 --> 00:04:29.970 three colors to choose from. Wait, beige? And 00:04:29.970 --> 00:04:33.509 maybe a dusty blue or that avocado green that 00:04:33.509 --> 00:04:35.649 was everywhere. Right, because the store manager's 00:04:35.649 --> 00:04:37.870 thinking, okay, I've got to sell tires and clothes 00:04:37.870 --> 00:04:40.910 and jewelry and lawnmowers. I can only give towels 00:04:40.910 --> 00:04:44.209 one single aisle. Exactly. It was a general store 00:04:44.209 --> 00:04:47.910 mentality. And into this world walk Warren Eisenberg 00:04:47.910 --> 00:04:51.069 and Leonard Feinstein. The architects. The architects. 00:04:51.129 --> 00:04:53.720 These two were retail veterans. They were working 00:04:53.720 --> 00:04:56.620 as managers at a discount chain called Arlen's. 00:04:57.079 --> 00:05:00.079 And they were smart guys. They saw the writing 00:05:00.079 --> 00:05:02.000 on the wall for Arlen's. They could see it was 00:05:02.000 --> 00:05:03.939 failing. They could. They realized that this... 00:05:04.139 --> 00:05:06.339 Jack of all trades store was going to get squeezed 00:05:06.339 --> 00:05:08.620 out of the market. They had this incredible insight 00:05:08.620 --> 00:05:11.680 that the future wasn't in general stores, but 00:05:11.680 --> 00:05:14.759 in specialty stores. Right. They basically thought, 00:05:14.839 --> 00:05:16.699 what if we stopped trying to sell a little bit 00:05:16.699 --> 00:05:19.040 of everything and instead we sold one thing, 00:05:19.040 --> 00:05:20.899 but we sold more of it than anyone else on earth. 00:05:21.100 --> 00:05:24.579 Focus. Extreme focus. So they leave Arlen's. 00:05:24.839 --> 00:05:27.959 They go to Springfield, New Jersey, which, you 00:05:27.959 --> 00:05:30.160 know, not exactly the retail capital of the world. 00:05:30.279 --> 00:05:33.139 Apparently it was. Apparently so. And they open 00:05:33.139 --> 00:05:36.730 a store. called, wait for it, Bed and Bath. Bed 00:05:36.730 --> 00:05:39.529 and Bath. Very simple, very direct, no beyond 00:05:39.529 --> 00:05:42.230 yet. Not yet. Just the basics. And for the first 00:05:42.230 --> 00:05:44.870 decade or so, they're doing pretty well. By 1985, 00:05:45.170 --> 00:05:47.689 they've got about 18 stores, mostly in the New 00:05:47.689 --> 00:05:51.189 York metro area in California. But this is where 00:05:51.189 --> 00:05:53.410 the pivotal moment happens. Because they weren't 00:05:53.410 --> 00:05:55.529 the only ones who had this specialty idea. No, 00:05:55.529 --> 00:05:57.970 you had this whole wave coming. A huge wave. 00:05:58.089 --> 00:06:00.449 This was the era of what some people call the 00:06:00.449 --> 00:06:02.949 linen wars. You had linens pillies. You had Pacific 00:06:02.949 --> 00:06:05.470 linen, luxury linens. Suddenly, everybody wanted 00:06:05.470 --> 00:06:08.110 to be the specialty home goods store. So Eisenberg 00:06:08.110 --> 00:06:10.230 and Feinstein have to escalate. They have to 00:06:10.230 --> 00:06:13.490 go nuclear. And in 1985, they opened their first 00:06:13.490 --> 00:06:16.529 superstore. And this is really the birth of the 00:06:16.529 --> 00:06:19.350 Bed, Bath & Beyond we all knew. This is the category 00:06:19.350 --> 00:06:22.769 killer model. And we hear that term a lot, you 00:06:22.769 --> 00:06:24.310 know, in business school, but let's really define 00:06:24.310 --> 00:06:26.329 what that means. Yeah, break it down. A category 00:06:26.329 --> 00:06:29.829 killer is a retailer that offers such an overwhelming, 00:06:29.990 --> 00:06:35.529 just an absolutely staggering selection of a 00:06:35.529 --> 00:06:38.589 specific category of merchandise. So many toasters 00:06:38.589 --> 00:06:40.970 you can't even count them. Exactly. So many toasters 00:06:40.970 --> 00:06:43.649 that it becomes impossible for a general store 00:06:43.649 --> 00:06:46.889 to even try to compete. It's retail shock and 00:06:46.889 --> 00:06:49.709 awe. It's shock and awe. That's a great way to 00:06:49.709 --> 00:06:51.750 put it. It is. I mean, think about the psychology 00:06:51.750 --> 00:06:53.930 of walking into one of those early super stores. 00:06:54.009 --> 00:06:56.790 They didn't design it like some fancy, you know, 00:06:56.790 --> 00:06:59.089 boutique. They designed it like a warehouse. 00:06:59.430 --> 00:07:01.170 They called it the jungle. That's what they called 00:07:01.170 --> 00:07:03.879 it internally. The jungle. And they stacked merchandise 00:07:03.879 --> 00:07:06.959 from the floor literally to the ceiling. If you 00:07:06.959 --> 00:07:09.420 were five foot two, you couldn't see over the 00:07:09.420 --> 00:07:11.620 toast rile. You were just, you were walled in 00:07:11.620 --> 00:07:13.939 by commerce. Which sounds kind of claustrophobic, 00:07:13.959 --> 00:07:15.959 but it was actually brilliant, wasn't it? It 00:07:15.959 --> 00:07:17.920 was incredibly effective because it triggered 00:07:17.920 --> 00:07:21.379 a treasure hunt mentality in the shopper. This 00:07:21.379 --> 00:07:24.160 is so crucial to their success. What do you mean 00:07:24.160 --> 00:07:26.480 by that? Well, in a normal store, you go in, 00:07:26.500 --> 00:07:28.319 you find the item you need, and you leave. It's 00:07:28.319 --> 00:07:31.100 a chore. It's an errand. In Bed Bath & Beyond, 00:07:31.339 --> 00:07:33.600 the layout was intentionally confusing. Wait, 00:07:33.620 --> 00:07:35.980 on purpose? Oh, absolutely on purpose. They wanted 00:07:35.980 --> 00:07:38.399 you to get lost. They created a layout where 00:07:38.399 --> 00:07:40.220 you would go in looking for a pillow. But to 00:07:40.220 --> 00:07:42.459 get to the pillows, you had to navigate past 00:07:42.459 --> 00:07:45.800 a mountain of obscure kitchen gadgets you never 00:07:45.800 --> 00:07:48.439 knew you needed. Right. And a tower of scented 00:07:48.439 --> 00:07:51.259 candles and a whole wall of those, as seen on 00:07:51.259 --> 00:07:52.879 TV products. And you're walking by thinking, 00:07:53.040 --> 00:07:55.399 do I need a vibrating neck massager? I didn't 00:07:55.399 --> 00:07:57.360 think I did five minutes ago, but now that I 00:07:57.360 --> 00:07:59.980 see this wall of them. Exactly. It was engineered 00:07:59.980 --> 00:08:02.860 to create impulse buys. You'd literally trick 00:08:02.860 --> 00:08:05.060 over things you didn't know existed. Wow. Oh, 00:08:05.180 --> 00:08:07.600 a strawberry huller. I guess I need that. A shower 00:08:07.600 --> 00:08:09.959 radio. Right. Into the cart it goes. It turned 00:08:09.959 --> 00:08:12.540 shopping from a chore into entertainment. And 00:08:12.540 --> 00:08:15.100 to reflect this massive expansion, this idea 00:08:15.100 --> 00:08:17.379 that it's so much more than just sheets and towels, 00:08:17.560 --> 00:08:20.680 they changed the name. In 1987, Bed and Bath 00:08:20.680 --> 00:08:23.680 becomes Bed, Bath, and Beyond. And that word 00:08:23.680 --> 00:08:27.180 beyond. to a lot of heavy lifting. It basically 00:08:27.180 --> 00:08:29.680 gave them permission to sell literally anything. 00:08:30.100 --> 00:08:32.740 Anything. Food, electronics, health and beauty 00:08:32.740 --> 00:08:35.840 products, furniture. I mean, if it could plausibly 00:08:35.840 --> 00:08:38.950 fit inside a house, it was now beyond. And my 00:08:38.950 --> 00:08:40.750 God, did it work. I mean, looking at the numbers 00:08:40.750 --> 00:08:42.809 from the 90s, it's just a rocket ship. They go 00:08:42.809 --> 00:08:46.169 public on the Nasdaq in June of 1992. And they 00:08:46.169 --> 00:08:48.090 were tech savvy, too, which is something people 00:08:48.090 --> 00:08:51.289 forget. In 1993, they adopted a computerized 00:08:51.289 --> 00:08:53.730 integrated inventory management system. Which 00:08:53.730 --> 00:08:56.129 sounds incredibly boring. Integrated inventory 00:08:56.129 --> 00:08:58.230 management. But why does that actually matter? 00:08:58.429 --> 00:09:01.769 It matters so much. Because in 1993, a lot of 00:09:01.769 --> 00:09:05.009 retail was still basically pen and paper. Bed 00:09:05.009 --> 00:09:07.490 Bath & Beyond, with this system, knew exactly 00:09:07.490 --> 00:09:09.429 what color towel was selling and what zip code 00:09:09.429 --> 00:09:11.789 on what day of the week. Wow. They could tailor 00:09:11.789 --> 00:09:14.210 the inventory of every single store to the specific 00:09:14.210 --> 00:09:17.230 neighborhood it was in. Their big rival, linens 00:09:17.230 --> 00:09:19.230 and things, just couldn't do that as effectively. 00:09:19.450 --> 00:09:21.470 So they were decentralized. The store managers 00:09:21.470 --> 00:09:24.929 had some power. Highly decentralized. Store managers 00:09:24.929 --> 00:09:28.110 had a ton of autonomy. If a manager in, say, 00:09:28.190 --> 00:09:31.250 Miami saw that neon green sheets were flying 00:09:31.250 --> 00:09:33.250 off the shelves for some reason. Right. They 00:09:33.250 --> 00:09:35.509 could order more immediately without having to 00:09:35.509 --> 00:09:38.950 ask corporate for permission. It made them incredibly 00:09:38.950 --> 00:09:41.909 agile. And the growth just continues. By 1999, 00:09:42.269 --> 00:09:45.129 they hit a billion dollars in sales. A billion. 00:09:45.289 --> 00:09:47.909 They opened their 200th store that same year. 00:09:48.090 --> 00:09:53.269 And if you fast forward to 2011, they had 1 ,142 00:09:53.269 --> 00:09:56.669 stores. They were a Fortune 500 company. They 00:09:56.669 --> 00:09:59.330 were in the Forbes Global 2000. They had won? 00:09:59.409 --> 00:10:01.889 They had. effectively won the war, linens and 00:10:01.889 --> 00:10:05.049 things, bankrupt in 2008, Pacific linen, gone. 00:10:05.429 --> 00:10:08.110 Bed Bath & Beyond was the undisputed king of 00:10:08.110 --> 00:10:09.610 the mountain. But you know what they say about 00:10:09.610 --> 00:10:11.090 being on top of the mountain? It's a long way 00:10:11.090 --> 00:10:13.389 down. It's a long way down, and it's very, very 00:10:13.389 --> 00:10:15.850 easy to become complacent. And while the 90s 00:10:15.850 --> 00:10:18.009 and 2000s were all about this explosive growth, 00:10:18.269 --> 00:10:20.950 the seeds of the company's destruction were actually 00:10:20.950 --> 00:10:23.090 being planted during this victory lap. Which 00:10:23.090 --> 00:10:25.710 brings us to act two, the acquisition spree. 00:10:26.469 --> 00:10:28.529 Because once they conquered the bedroom and the 00:10:28.529 --> 00:10:31.350 bathroom, they decided they needed to own, well, 00:10:31.409 --> 00:10:33.450 everything else in the house too. And this is 00:10:33.450 --> 00:10:35.529 a classic corporate strategy problem, right? 00:10:35.649 --> 00:10:38.009 Yeah. When you become ubiquitous, when there's 00:10:38.009 --> 00:10:40.470 literally a Bed Bath & Beyond in every strip 00:10:40.470 --> 00:10:43.190 mall that can possibly support one, you hit a 00:10:43.190 --> 00:10:45.190 growth wall. You can't just keep opening more 00:10:45.190 --> 00:10:47.370 stores. You can't. You start cannibalizing your 00:10:47.370 --> 00:10:49.990 own sales. So the big question for the executives 00:10:49.990 --> 00:10:52.429 becomes, how do you keep the stock price going 00:10:52.429 --> 00:10:54.429 up? How do you show Wall Street you're still 00:10:54.429 --> 00:10:56.570 growing? You buy other people. You buy growth. 00:10:56.769 --> 00:10:58.769 Exactly. So let's just run through the shopping 00:10:58.769 --> 00:11:02.250 list because it's eclectic. It is. 2002, they 00:11:02.250 --> 00:11:04.610 buy Harman Discount Health and Beauty. Which 00:11:04.610 --> 00:11:07.250 became Harman Face Values. You know, these were 00:11:07.250 --> 00:11:09.929 small footprint stores, cheap shampoo, toothpaste. 00:11:10.370 --> 00:11:12.570 It was actually a pretty decent business. Very 00:11:12.570 --> 00:11:15.509 high volume. Then in 2003, they buy Christmas 00:11:15.509 --> 00:11:18.909 Tree Shops. Now I have to pause here. If you 00:11:18.909 --> 00:11:20.570 are from New England, you know Christmas Tree 00:11:20.570 --> 00:11:23.730 Shops. It's an institution. If you aren't, the 00:11:23.730 --> 00:11:26.070 name is completely baffling because they sold 00:11:26.070 --> 00:11:28.389 way more than just Christmas trees. Oh, yeah. 00:11:28.509 --> 00:11:31.769 It was a cult favorite in the Northeast and it 00:11:31.769 --> 00:11:34.529 fit their treasure hunt vibe perfectly. You go 00:11:34.529 --> 00:11:36.629 in for wrapping paper and come out with like 00:11:36.629 --> 00:11:39.590 a lawn gnome and a giant bag of pretzels. Right. 00:11:39.769 --> 00:11:42.710 Then in 2012, they make a much bigger move. They 00:11:42.710 --> 00:11:46.669 dropped nearly half a billion dollars. $495 million 00:11:46.669 --> 00:11:49.570 to buy Cost Plus World Market. That was a bigger 00:11:49.570 --> 00:11:52.110 swing. World Market was all about unique imported 00:11:52.110 --> 00:11:55.070 goods. You know, furniture, wine, weird snacks 00:11:55.070 --> 00:11:57.389 from Germany. It was a clear attempt to get into 00:11:57.389 --> 00:12:00.250 that kind of bohemian chic market. And then came 00:12:00.250 --> 00:12:02.889 the digital buys trying to catch up online. One 00:12:02.889 --> 00:12:06.370 Kings Lane in 2016 for luxury furniture. Decorist 00:12:06.370 --> 00:12:09.029 in 2017 for online interior design. They were 00:12:09.029 --> 00:12:11.149 just gobbling up brands left and right. But we 00:12:11.149 --> 00:12:13.570 need to zoom in on one specific acquisition. 00:12:14.220 --> 00:12:16.960 Or really, a pair of acquisitions. Because later 00:12:16.960 --> 00:12:18.620 on, when the activists came for the company, 00:12:18.799 --> 00:12:21.220 they pointed to these two deals and said this. 00:12:21.740 --> 00:12:24.039 This is proof that the company is rotting from 00:12:24.039 --> 00:12:26.480 the head down. You're talking about the nepotism 00:12:26.480 --> 00:12:29.240 controversy. I am. Let's start with Bye Bye Baby. 00:12:29.440 --> 00:12:32.539 It was acquired in 2007. And look, I Buy Baby 00:12:32.539 --> 00:12:34.600 was a successful chain. It eventually became 00:12:34.600 --> 00:12:36.240 the most valuable part of the whole company. 00:12:36.539 --> 00:12:39.250 The jewel in the crown. No question. But who 00:12:39.250 --> 00:12:41.649 founded it? It was founded by Richard and Jeffrey 00:12:41.649 --> 00:12:44.330 Feinstein. And who are they? They are the sons 00:12:44.330 --> 00:12:46.789 of the Bed Bath & Beyond co -founder Leonard 00:12:46.789 --> 00:12:49.169 Feinstein. Right. So the company, a public company, 00:12:49.370 --> 00:12:52.450 uses shareholder money to buy the co -founder's 00:12:52.450 --> 00:12:55.610 son's company. The price was roughly $67 million, 00:12:55.929 --> 00:12:58.350 plus they paid off its debt. Okay. That looks 00:12:58.350 --> 00:13:02.169 cozy. It gets cozier. There was another smaller 00:13:02.169 --> 00:13:06.490 acquisition, a company called Chef Central. What 00:13:06.490 --> 00:13:08.129 do you think created that one? Let me guess. 00:13:08.370 --> 00:13:11.889 It was the son of the other co -founder, Warren 00:13:11.889 --> 00:13:15.529 Eisenberg. You see the pattern. Now, to be fair, 00:13:15.549 --> 00:13:17.669 we have to say Bye Bye Baby was a legitimate, 00:13:17.789 --> 00:13:20.809 successful business. It filled a huge void when 00:13:20.809 --> 00:13:23.649 Babies R Us went under. It was profitable. But 00:13:23.649 --> 00:13:27.549 from a corporate governance perspective, when 00:13:27.549 --> 00:13:30.509 you are a public company using shareholder money 00:13:30.509 --> 00:13:33.070 to acquire businesses owned by the founder's 00:13:33.070 --> 00:13:36.919 own children. It just raises massive red flags. 00:13:37.080 --> 00:13:39.019 It makes it look like a family fiefdom, not a 00:13:39.019 --> 00:13:41.259 public corporation. Exactly. It sends a signal 00:13:41.259 --> 00:13:42.980 to Wall Street that this isn't the meritocracy. 00:13:43.159 --> 00:13:45.299 It's a family business that's just pretending 00:13:45.299 --> 00:13:47.960 to be a modern corporation. And that kind of 00:13:47.960 --> 00:13:50.139 vibe is fine when the stock is going up and up. 00:13:50.240 --> 00:13:51.639 Nobody's asked questions when they're making 00:13:51.639 --> 00:13:56.399 money. Nobody cares. But around 2015, 2016, the 00:13:56.399 --> 00:13:58.690 music starts to slow down. And the whole retail 00:13:58.690 --> 00:14:00.889 landscape had just shifted dramatically under 00:14:00.889 --> 00:14:02.929 their feet. Amazon was becoming the everything 00:14:02.929 --> 00:14:05.330 store. Wayfair was eating the furniture market 00:14:05.330 --> 00:14:07.769 online. And suddenly that treasure hunt at Bed 00:14:07.769 --> 00:14:10.889 Bath & Beyond started to feel less like an adventure. 00:14:10.990 --> 00:14:13.529 And more like a hassle. It really did. The stores 00:14:13.529 --> 00:14:15.529 were cluttered. The aisles were too tight to 00:14:15.529 --> 00:14:17.750 get a cart through. And frankly, why would I 00:14:17.750 --> 00:14:20.250 dig through a giant bin for a spatula when I 00:14:20.250 --> 00:14:22.570 can press one button on my phone and have the 00:14:22.570 --> 00:14:24.909 highest rated spatula in the world delivered 00:14:24.909 --> 00:14:27.149 to my door tomorrow? The category killer was 00:14:27.149 --> 00:14:29.690 getting killed by the ultimate category killer, 00:14:29.909 --> 00:14:32.690 the internet. Which moves us right into act three, 00:14:32.889 --> 00:14:37.129 the slow bleed. We're in 2019 now. The stock 00:14:37.129 --> 00:14:40.049 has been sliding for years. The stores feel dated. 00:14:40.830 --> 00:14:43.309 And the sharks start circling in the water. The 00:14:43.309 --> 00:14:45.830 sharks in this particular story were a trio of 00:14:45.830 --> 00:14:49.309 activist investment firms, Legion Partners, Masellum 00:14:49.309 --> 00:14:52.129 Advisors, and Ancora Advisors. Activist investors. 00:14:52.750 --> 00:14:55.250 Just to clarify, these are the guys who buy a 00:14:55.250 --> 00:14:57.950 big chunk of a company's stock, not because they 00:14:57.950 --> 00:14:59.889 love the company, but because they want to force 00:14:59.889 --> 00:15:02.529 changes to make the stock pop, right? Precisely. 00:15:02.529 --> 00:15:04.570 They want to get in, shake things up, make a 00:15:04.570 --> 00:15:07.190 quick profit, and get out. And in March 2019, 00:15:07.490 --> 00:15:10.049 they launched a full -on revolt. I remember this. 00:15:10.120 --> 00:15:12.000 They released a presentation. It was like a slide 00:15:12.000 --> 00:15:13.879 deck from hell that just tore the management 00:15:13.879 --> 00:15:16.340 apart. Oh, it was brutal. They called out the 00:15:16.340 --> 00:15:18.460 nepotism with the kids' companies. They called 00:15:18.460 --> 00:15:21.000 out the declining profit margins. They pointed 00:15:21.000 --> 00:15:24.379 out that the CEO, Stephen Tamaris, had been there 00:15:24.379 --> 00:15:28.120 for 16 years and seemed to have absolutely no 00:15:28.120 --> 00:15:31.419 plan for the digital age. And they won. They 00:15:31.419 --> 00:15:34.000 did. It was a massive shakeup. A boardroom coup. 00:15:34.480 --> 00:15:36.799 Tamaris stepped down. The board was completely 00:15:36.799 --> 00:15:40.700 restructured. And in November... they brought 00:15:40.700 --> 00:15:42.440 in the person they thought would be the savior. 00:15:42.659 --> 00:15:44.980 Mark Triton. Mark Triton. He was the golden boy. 00:15:45.100 --> 00:15:47.799 He came from Target, where he was the chief merchandising 00:15:47.799 --> 00:15:49.980 officer, and everyone on Wall Street thought, 00:15:50.100 --> 00:15:52.179 okay, this is it. He helped make Target cool 00:15:52.179 --> 00:15:54.759 and successful. He's going to fix Bed, Bath & 00:15:54.759 --> 00:15:57.870 Beyond. And his plan was very Target -esque. 00:15:57.929 --> 00:16:00.590 On paper, it made a lot of sense. He wanted to 00:16:00.590 --> 00:16:02.730 declutter the stores, you know, wider aisles, 00:16:02.750 --> 00:16:04.769 cleaner sight lines, less stuff piled to the 00:16:04.769 --> 00:16:07.169 ceiling. Made sense. And he wanted to lean heavily 00:16:07.169 --> 00:16:10.990 into private labels' own brands that the company 00:16:10.990 --> 00:16:12.970 creates itself, rather than just selling national 00:16:12.970 --> 00:16:15.129 brands. So instead of selling a Cuisinart blender, 00:16:15.389 --> 00:16:18.110 they'd sell a Bed Bath & Beyond brand blender. 00:16:18.230 --> 00:16:20.950 Right. Because the profit margins are much, much 00:16:20.950 --> 00:16:23.570 higher on your own stuff. But here is where he 00:16:23.570 --> 00:16:26.570 completely miscalculated. Bed Bath & Beyond customers 00:16:26.570 --> 00:16:28.789 were not Target customers. A totally different 00:16:28.789 --> 00:16:30.889 shopper. Totally different. They came for the 00:16:30.889 --> 00:16:33.269 brands. They came for the all -clad pans and 00:16:33.269 --> 00:16:35.809 the Dyson vacuums. When you take away those trusted 00:16:35.809 --> 00:16:39.250 brands and you replace them with a generic Studio 00:16:39.250 --> 00:16:42.929 3B brand that nobody has ever heard of, people 00:16:42.929 --> 00:16:45.350 get annoyed. And then came the cardinal sin, 00:16:45.529 --> 00:16:47.269 the thing you mentioned at the very beginning, 00:16:47.450 --> 00:16:49.909 killing the coupon. It was the strategy shift 00:16:49.909 --> 00:16:53.289 heard around the world. Trayton and his new team. 00:16:53.629 --> 00:16:56.409 wanted to reduce the company's reliance on those 00:16:56.409 --> 00:17:00.509 blue coupons. His thinking was, we have trained 00:17:00.509 --> 00:17:04.630 our customer to never, ever pay full price. We 00:17:04.630 --> 00:17:07.009 have to break that addiction. Which, you know, 00:17:07.029 --> 00:17:09.269 logically makes some sense. If you give everyone 00:17:09.269 --> 00:17:11.369 20 % off on every purchase, you're just lighting 00:17:11.369 --> 00:17:14.609 20 % of your revenue on fire. Economically, yes. 00:17:15.069 --> 00:17:17.750 Psychologically. It was corporate suicide. That 00:17:17.750 --> 00:17:19.710 coupon was the only reason a lot of people still 00:17:19.710 --> 00:17:21.849 walked in the door. It was the dopamine hit. 00:17:22.089 --> 00:17:23.789 It was the whole point of the trip. Yeah. When 00:17:23.789 --> 00:17:26.470 you take that away and at the same time you replace 00:17:26.470 --> 00:17:28.670 the brand names they love with generic knockoffs, 00:17:28.809 --> 00:17:32.150 you are basically telling your most loyal customers 00:17:32.150 --> 00:17:34.150 we don't want you anymore. And they listened. 00:17:34.349 --> 00:17:37.970 They stopped coming. Sales just plummeted. But 00:17:37.970 --> 00:17:40.950 the real killer. The thing that turned a struggling 00:17:40.950 --> 00:17:43.990 company into a complete catastrophe. It wasn't 00:17:43.990 --> 00:17:45.809 the coupons. It was the financial engineering 00:17:45.809 --> 00:17:48.029 that was happening in the background. We have 00:17:48.029 --> 00:17:51.109 to talk about the stock buybacks. Okay. We absolutely 00:17:51.109 --> 00:17:53.589 have to stop the car here. We need to really, 00:17:53.650 --> 00:17:55.990 really unpack this. Because in the research for 00:17:55.990 --> 00:17:58.430 this deep dive, I saw a number that made my jaw 00:17:58.430 --> 00:18:02.349 hit the floor. $11 .8 billion. That is the estimated 00:18:02.349 --> 00:18:04.829 amount that Bed Bath & Beyond spent buying back 00:18:04.829 --> 00:18:07.349 its own stock, starting in 2004 and going right 00:18:07.349 --> 00:18:12.869 to the end. 11. Now, for the listener who isn't 00:18:12.869 --> 00:18:14.970 a day trader, can you just explain this simply? 00:18:15.150 --> 00:18:17.789 What is a stock buyback, and why would a company 00:18:17.789 --> 00:18:20.589 spend its own cash to buy itself? Okay, let's 00:18:20.589 --> 00:18:23.089 strip it all the way down. Imagine you and I, 00:18:23.150 --> 00:18:26.170 we open a pizza shop. To raise money to buy the 00:18:26.170 --> 00:18:29.569 big pizza oven, we sell 100 shares of stock to 00:18:29.569 --> 00:18:32.289 our friends and family. So there are 100 shares 00:18:32.289 --> 00:18:34.849 of our pizza company in existence. Okay, I own 00:18:34.849 --> 00:18:37.450 one share, you own one, our friends own the rest. 00:18:37.980 --> 00:18:40.160 Got it. Right. At the end of our first year, 00:18:40.299 --> 00:18:43.900 our pizza shop makes $100 in profit. Simple math. 00:18:44.980 --> 00:18:49.019 $100 of profit divided by 100 shares equals $1 00:18:49.019 --> 00:18:51.940 of profit per share. That's your EPS, your earnings 00:18:51.940 --> 00:18:54.720 per share. Wall Street is obsessed with EPS. 00:18:55.059 --> 00:18:57.279 It's the scorecard. Got it. My share earned a 00:18:57.279 --> 00:19:00.599 dollar. I'm happy. You're happy. But now imagine 00:19:00.599 --> 00:19:03.500 next year we want our stock price to go up. But 00:19:03.500 --> 00:19:04.759 we didn't sell any more pizza. We're a mature 00:19:04.759 --> 00:19:07.279 business. We still only made $100. The business 00:19:07.279 --> 00:19:09.579 is totally flat. How do we make the shares look 00:19:09.579 --> 00:19:11.599 more valuable without actually working harder 00:19:11.599 --> 00:19:13.640 or selling more pizza? We fledge the numbers. 00:19:14.019 --> 00:19:17.720 No, that's jail. That's fraud. Instead, we do 00:19:17.720 --> 00:19:20.640 something perfectly legal. We take the cash that's 00:19:20.640 --> 00:19:22.819 sitting in our cash register, our savings, and 00:19:22.819 --> 00:19:25.880 we go to our friends and we buy back 50 of their 00:19:25.880 --> 00:19:29.519 shares. And we retire them. We basically shred 00:19:29.519 --> 00:19:32.000 them. So now there are only 50 shares of our 00:19:32.000 --> 00:19:34.339 pizza shop left in the entire world. Exactly. 00:19:34.519 --> 00:19:37.799 But we still made our $100 in profit. So do the 00:19:37.799 --> 00:19:41.380 math now. $100 of profit divided by 50 shares 00:19:41.380 --> 00:19:46.099 is $2 per share. Bingo. The business didn't get 00:19:46.099 --> 00:19:48.259 any better. We didn't sell a single extra slice 00:19:48.259 --> 00:19:50.960 of pepperoni. But suddenly our earnings per share 00:19:50.960 --> 00:19:54.500 magically doubled from $1 to $2. Wall Street's 00:19:54.500 --> 00:19:56.779 algorithms see that growth and they bid up our 00:19:56.779 --> 00:19:59.339 stock price. It's a magic trick. It is financial 00:19:59.339 --> 00:20:01.480 engineering. And corporate executives love it 00:20:01.480 --> 00:20:03.599 because their multi -million dollar bonuses are 00:20:03.599 --> 00:20:05.839 often tied directly to hitting the share price 00:20:05.839 --> 00:20:08.759 targets. But here's the massive catch. To buy 00:20:08.759 --> 00:20:11.519 those shares back, we had to empty our cash register. 00:20:11.799 --> 00:20:13.480 Right. We used up all the cash we might have 00:20:13.480 --> 00:20:16.039 needed to, say, fix the oven when it breaks or 00:20:16.039 --> 00:20:18.779 maybe build a delivery app. Or survive a global 00:20:18.779 --> 00:20:21.299 pandemic. And that's what Bed Bath & Beyond did. 00:20:21.440 --> 00:20:23.920 On an absolutely massive scale. They spent nearly 00:20:23.920 --> 00:20:28.000 $12 billion on this. Just imagine for a second 00:20:28.000 --> 00:20:31.880 if they had taken half of that, $6 billion, and 00:20:31.880 --> 00:20:34.920 invested it in building a world -class e -commerce 00:20:34.920 --> 00:20:37.940 and logistics network back in 2010. They could 00:20:37.940 --> 00:20:40.059 have been a real competitor to Amazon. It could 00:20:40.059 --> 00:20:42.940 have been. Instead, they basically set that cash 00:20:42.940 --> 00:20:45.519 on fire to prop up the stock price for a few 00:20:45.519 --> 00:20:48.019 more years. And then the rainy day came. And 00:20:48.019 --> 00:20:50.220 the cash register was completely empty. This 00:20:50.220 --> 00:20:52.660 led directly to the supply chain collapse that 00:20:52.660 --> 00:20:55.000 we saw in 2022. I don't know if you went into 00:20:55.000 --> 00:20:57.099 one of their stores then, but it was eerie. I 00:20:57.099 --> 00:20:59.460 did. I remember walking in and my first thought 00:20:59.460 --> 00:21:02.019 was, are they closing? The shelves were just 00:21:02.019 --> 00:21:05.339 barren. They were taking like one towel and spreading 00:21:05.339 --> 00:21:08.400 it out to fill three feet of. empty shelf space. 00:21:08.680 --> 00:21:10.059 That's because they couldn't pay their vendors. 00:21:10.220 --> 00:21:12.339 Yeah. It's that simple. If you don't pay KitchenAid, 00:21:12.339 --> 00:21:14.839 KitchenAid stops sending you stand mixers. No 00:21:14.839 --> 00:21:17.339 cash means no inventory. No inventory means no 00:21:17.339 --> 00:21:20.279 sales. No sales means no cash. It's a death spiral. 00:21:20.539 --> 00:21:24.180 Which brings us to act four, the collapse. The 00:21:24.180 --> 00:21:27.640 years 2022 and 2023. This is where the story 00:21:27.640 --> 00:21:30.359 goes from struggling retailer to just absolute 00:21:30.359 --> 00:21:33.279 utter chaos. And we enter the meme stock era. 00:21:33.660 --> 00:21:36.000 Bed Bath & Beyond became one of those stocks, 00:21:36.119 --> 00:21:39.160 just like GameStop or AMC, that online traders 00:21:39.160 --> 00:21:42.400 on Reddit forums became obsessed with. They wanted 00:21:42.400 --> 00:21:44.140 to stick it to the big hedge funds who were betting 00:21:44.140 --> 00:21:45.920 against the company. And the central character 00:21:45.920 --> 00:21:48.339 in this part of the story is Ryan Cohen. The 00:21:48.339 --> 00:21:50.799 founder of Chewy .com, a billionaire activist 00:21:50.799 --> 00:21:53.180 investor and a hero to the meme stock crowd. 00:21:53.609 --> 00:21:57.150 In March of 2022, Cohen buys a huge stake in 00:21:57.150 --> 00:22:00.049 the company, almost 10%. He sends a blistering 00:22:00.049 --> 00:22:02.190 letter to the board, and he basically says, your 00:22:02.190 --> 00:22:04.450 strategy is a total failure. You need to sell 00:22:04.450 --> 00:22:07.390 off Buy Baby immediately because it's the only 00:22:07.390 --> 00:22:09.670 thing of value you have left. And because he's 00:22:09.670 --> 00:22:12.109 Ryan Cohen, the retail investors on Reddit go 00:22:12.109 --> 00:22:14.349 wild. The stock just shoots to the moon. He gets 00:22:14.349 --> 00:22:16.559 three seats on the board. And for a brief moment, 00:22:16.660 --> 00:22:19.180 it looked like maybe, just maybe, he was going 00:22:19.180 --> 00:22:22.259 to turn it around. But then July 2022, Mark Trenton, 00:22:22.279 --> 00:22:25.519 the CEO, is fired. Sue Gove takes over. And then 00:22:25.519 --> 00:22:29.220 August happens. August of 2022. The stock pumps 00:22:29.220 --> 00:22:32.519 massively again on pure speculation. And right 00:22:32.519 --> 00:22:36.549 at the very peak, Ryan Cohen sells. Everything. 00:22:36.569 --> 00:22:38.690 He dumps his entire stake in the company. You 00:22:38.690 --> 00:22:40.890 walked away with a profit of something like $60 00:22:40.890 --> 00:22:43.289 million, right? In just a few months. Roughly, 00:22:43.289 --> 00:22:46.369 yes. And the stock crashed immediately. The retail 00:22:46.369 --> 00:22:48.390 investors, the regular people who had followed 00:22:48.390 --> 00:22:50.490 him into the trade, who believed in him, they 00:22:50.490 --> 00:22:53.069 were left holding the bag. It was a classic rug 00:22:53.069 --> 00:22:56.190 pull. And amidst all this financial chaos, there 00:22:56.190 --> 00:22:59.130 was a terrible human tragedy. In September 2022, 00:22:59.529 --> 00:23:04.599 the company's CFO, Gustavo Arnal, It was a shocking, 00:23:04.680 --> 00:23:06.680 just a heartbreaking event. He had recently been 00:23:06.680 --> 00:23:08.660 named in a class action lawsuit that alleged 00:23:08.660 --> 00:23:11.359 a pump and dump scheme regarding the stock alongside 00:23:11.359 --> 00:23:14.200 Ryan Cohen. And, you know, we have to be careful 00:23:14.200 --> 00:23:16.059 not to speculate on his personal state of mind, 00:23:16.119 --> 00:23:18.700 but it highlighted the immense crushing pressure 00:23:18.700 --> 00:23:21.000 that was happening behind the scenes. The walls 00:23:21.000 --> 00:23:22.960 were just closing in from every single side. 00:23:23.359 --> 00:23:26.539 It really cast a very dark shadow over the company's 00:23:26.539 --> 00:23:29.619 final months. And operationally, the company 00:23:29.619 --> 00:23:32.619 was in a complete freefall. In January 2023, 00:23:33.160 --> 00:23:36.819 they issued a going concern warning. And that's 00:23:36.819 --> 00:23:38.920 basically corporate speak for we don't think 00:23:38.920 --> 00:23:41.420 we're going to make it. The stock plunged 30 00:23:41.420 --> 00:23:44.640 percent on that news alone. Analysts were predicting 00:23:44.640 --> 00:23:48.079 bankruptcy within days. But then we saw one of 00:23:48.079 --> 00:23:50.700 the most bizarre financial maneuvers in recent 00:23:50.700 --> 00:23:54.309 retail history. The death spiral financing. It 00:23:54.309 --> 00:23:56.049 sounds like a wrestling move. He's got him in 00:23:56.049 --> 00:23:58.230 the death spiral or like a heavy metal band. 00:23:58.450 --> 00:23:59.990 It is definitely not something you want to be 00:23:59.990 --> 00:24:02.329 involved with financially. So explain this to 00:24:02.329 --> 00:24:04.549 me. They needed cash desperately. They made a 00:24:04.549 --> 00:24:06.789 deal with a hedge fund called Hudson Bay Capital. 00:24:06.950 --> 00:24:08.930 How did this work? Because it sounds incredibly 00:24:08.930 --> 00:24:11.210 complex. It is complex, but let's try to simplify 00:24:11.210 --> 00:24:14.670 it. Bed Bath & Beyond needed money right now 00:24:14.670 --> 00:24:17.230 just to pay vendors and keep the lights on. Hudson 00:24:17.230 --> 00:24:19.990 Bay said we'll give you up to $1 billion. Okay, 00:24:20.049 --> 00:24:22.910 that sounds good. A lifeline. But, Hudson Bay 00:24:22.910 --> 00:24:25.869 said, in exchange, you don't give us cash back. 00:24:26.210 --> 00:24:28.509 You give us something called convertible preferred 00:24:28.509 --> 00:24:32.049 stock. And the key feature of this stock is that 00:24:32.049 --> 00:24:34.549 we can convert it into regular shares of your 00:24:34.549 --> 00:24:36.829 company at a discount to whatever the current 00:24:36.829 --> 00:24:39.269 trading price is. Wait, whatever the current 00:24:39.269 --> 00:24:41.509 price is? That sounds really dangerous. It's 00:24:41.509 --> 00:24:43.670 lethal. Yeah. So let's say the stock is trading 00:24:43.670 --> 00:24:46.670 at $5 a share. Hudson Bay converts some of their 00:24:46.670 --> 00:24:49.029 debt into stock, but they get it at a discount. 00:24:49.369 --> 00:24:52.230 say for $4, they immediately sell that stock 00:24:52.230 --> 00:24:55.150 on the open market for $5. And they make an instant 00:24:55.150 --> 00:24:58.470 risk -free profit of $1 per share. Exactly. Nice 00:24:58.470 --> 00:25:00.690 deal for them. But what happens to the stock 00:25:00.690 --> 00:25:02.950 price when they dump all those newly created 00:25:02.950 --> 00:25:05.089 shares on the market to get their profit? Supply 00:25:05.089 --> 00:25:07.130 and demand. When you flood the market with sell 00:25:07.130 --> 00:25:09.750 orders, the price drops. So the stock goes from 00:25:09.750 --> 00:25:13.150 $5 down to $3. Right. But Hudson Bay still has 00:25:13.150 --> 00:25:15.970 more debt to convert. And remember, the deal 00:25:15.970 --> 00:25:18.089 says they get a discount on whatever the current 00:25:18.089 --> 00:25:20.490 price is. So now they convert their next batch 00:25:20.490 --> 00:25:24.690 at, say, $2 .50. And they sell it at $3. Which 00:25:24.690 --> 00:25:27.529 drives the price down even further to maybe $2. 00:25:27.690 --> 00:25:30.890 Then they convert at $1 .50, sell at $2, drive 00:25:30.890 --> 00:25:33.410 it down to $1. It's a loop. It just feeds on 00:25:33.410 --> 00:25:36.009 itself. It is the spiral. The more they convert 00:25:36.009 --> 00:25:38.650 and sell... the lower the price goes. And the 00:25:38.650 --> 00:25:40.369 lower the price goes, the more shares Bed Bath 00:25:40.369 --> 00:25:42.569 & Beyond has to print to pay back the same amount 00:25:42.569 --> 00:25:44.930 of money. It just dilutes all the existing shareholders 00:25:44.930 --> 00:25:48.029 down to basically zero. Completely. It was a 00:25:48.029 --> 00:25:50.109 Hail Mary that delayed the inevitable by a few 00:25:50.109 --> 00:25:52.910 months, but it absolutely destroyed the equity. 00:25:53.410 --> 00:25:55.730 The deal actually fell apart in March because 00:25:55.730 --> 00:25:57.849 the stock price got so low that the math just 00:25:57.849 --> 00:26:00.480 stopped working. And that was it. Game over. 00:26:00.559 --> 00:26:04.119 April 23rd, 2023. Bed Bath & Beyond officially 00:26:04.119 --> 00:26:07.319 files for Chapter 11 bankruptcy. And it's important 00:26:07.319 --> 00:26:09.519 to note this wasn't a reorganization bankruptcy 00:26:09.519 --> 00:26:11.700 where they planned to fix the debt and stay open. 00:26:11.799 --> 00:26:13.960 This was a liquidation. They were parting out 00:26:13.960 --> 00:26:17.869 the car for scraps. April 26th, 2023. The day 00:26:17.869 --> 00:26:20.089 the coupons died, they announced they would no 00:26:20.089 --> 00:26:22.170 longer accept them. I remember reading reports 00:26:22.170 --> 00:26:24.950 of people just rushing to the stores with these 00:26:24.950 --> 00:26:27.910 huge stacks of blue coupons, desperate to buy 00:26:27.910 --> 00:26:29.970 anything they could before they became worthless. 00:26:30.210 --> 00:26:32.549 It was truly the end of an era. And other retailers, 00:26:32.730 --> 00:26:35.809 I remember the Container Store, Big Lots, Boscobs, 00:26:35.829 --> 00:26:38.849 they briefly said, hey, bring us your useless 00:26:38.849 --> 00:26:40.950 bed bath coupons. We'll honor them. Which is 00:26:40.950 --> 00:26:42.769 a brilliant marketing move. Just genius. Come 00:26:42.769 --> 00:26:44.349 to us. We'll take care of you. And then came 00:26:44.349 --> 00:26:47.259 the long goodbye. The liquidation sales. The 00:26:47.259 --> 00:26:50.079 giant everything must go signs. And the last 00:26:50.079 --> 00:26:52.440 brick and mortar Bed Bath & Beyond store in the 00:26:52.440 --> 00:26:55.420 United States closed its doors for good on July 00:26:55.420 --> 00:26:58.359 30th, 2023. And that really should have been 00:26:58.359 --> 00:27:02.359 the end of the story. 1971 to 2023. R .I .P. 00:27:02.740 --> 00:27:06.579 A retail giant is dead. But it wasn't. And this 00:27:06.579 --> 00:27:09.279 is where we get to Act 5. The strange, strange 00:27:09.279 --> 00:27:11.579 afterlife. Because here we are recording this 00:27:11.579 --> 00:27:13.900 in 2026 and the name Bed Bath & Beyond is still 00:27:13.900 --> 00:27:15.920 everywhere. It's like a ghost that found a new 00:27:15.920 --> 00:27:18.000 body to possess. It's the zombie brand phenomenon. 00:27:18.380 --> 00:27:21.160 In June of 2023, during the bankruptcy auction, 00:27:21.420 --> 00:27:24.619 the online retailer Overstock .com swooped in. 00:27:25.000 --> 00:27:27.599 Overstock. Another one of the dot -com era survivors. 00:27:28.240 --> 00:27:30.279 Right. And it bought the intellectual property. 00:27:30.359 --> 00:27:33.839 So the name, the customer data, the website domains 00:27:33.839 --> 00:27:38.390 for $21 .5 million. Which is a... Deal, honestly. 00:27:38.769 --> 00:27:41.910 $21 .5 million for a brand name that almost every 00:27:41.910 --> 00:27:44.769 single American knows. That's pennies. It was 00:27:44.769 --> 00:27:47.089 an absolute bargain. And Overstock did something 00:27:47.089 --> 00:27:48.930 really radical. They didn't just run Bed Bath 00:27:48.930 --> 00:27:52.269 & Beyond as like a little side project. They 00:27:52.269 --> 00:27:55.049 realized their own name, Overstock, was kind 00:27:55.049 --> 00:27:57.089 of a problem. It sounds cheap. It sounds like 00:27:57.089 --> 00:28:00.079 a clearance bin. It sounds like leftovers. So 00:28:00.079 --> 00:28:02.240 they made a bold move. They ditched it. They 00:28:02.240 --> 00:28:05.420 rebranded their entire company. Overstock .com 00:28:05.420 --> 00:28:08.579 became Bed Bath & Beyond Online. They just took 00:28:08.579 --> 00:28:10.339 the name and slapped it right onto their website. 00:28:10.579 --> 00:28:13.660 So if you go to BedBathAndBeyond .com right now 00:28:13.660 --> 00:28:16.059 in the United States, you are technically shopping 00:28:16.059 --> 00:28:18.779 at what used to be Overstock. Precisely. And 00:28:18.779 --> 00:28:20.940 the original corporate entity, the one that actually 00:28:20.940 --> 00:28:23.880 went bankrupt, it had to change its name to something 00:28:23.880 --> 00:28:26.740 incredibly robotic just so it could dissolve 00:28:26.740 --> 00:28:33.589 and die in court. It's now called 202030930 -DKButterfly1, 00:28:33.710 --> 00:28:36.390 Inc. DKButterfly. That sounds like a bad sci 00:28:36.390 --> 00:28:39.150 -fi movie. It really does. Now, what about Bye 00:28:39.150 --> 00:28:41.349 Bye Baby? You mentioned it was the jewel in the 00:28:41.349 --> 00:28:43.690 crown. That was a much sadder story, unfortunately. 00:28:44.190 --> 00:28:46.349 It was sold off separately to a company called 00:28:46.349 --> 00:28:49.609 Dream On Me, which is a New Jersey -based... 00:28:49.819 --> 00:28:52.400 baby furniture manufacturer. They paid about 00:28:52.400 --> 00:28:55.339 $15 .5 million for it. And they had big ambitions, 00:28:55.460 --> 00:28:58.500 didn't they? They wanted to reopen like 120 stores. 00:28:58.900 --> 00:29:01.380 They really tried to stage this massive comeback. 00:29:01.579 --> 00:29:04.980 He did, but it just didn't stick. No. Running 00:29:04.980 --> 00:29:07.660 physical retail is incredibly hard. And by the 00:29:07.660 --> 00:29:11.420 end of 2024, all of those reopened buy -baby 00:29:11.420 --> 00:29:13.880 stores had closed down again. They had to pivot 00:29:13.880 --> 00:29:17.009 to being purely an online operation. It just 00:29:17.009 --> 00:29:18.529 goes to show you that buying a beloved brand 00:29:18.529 --> 00:29:20.750 name doesn't guarantee you can actually run the 00:29:20.750 --> 00:29:23.130 physical stores profitably. But speaking of physical 00:29:23.130 --> 00:29:26.049 stores, let's look north of the border because 00:29:26.049 --> 00:29:28.230 the Canadian saga is a roller coaster that is 00:29:28.230 --> 00:29:30.690 still going on right now as we speak. It really 00:29:30.690 --> 00:29:33.049 is. So the Canadian arm of Bed Bath & Beyond 00:29:33.049 --> 00:29:35.970 liquidated in April 2023 right alongside the 00:29:35.970 --> 00:29:38.789 U .S. stores. But then a guy named Doug Putman 00:29:38.789 --> 00:29:41.069 enters the chat. The Canadian billionaire who 00:29:41.069 --> 00:29:44.309 owns Toys R .S. Canada. He loves a distressed 00:29:44.309 --> 00:29:48.269 retail asset. He bought 21 of the old Bed Bath 00:29:48.269 --> 00:29:51.069 & Beyond leases, and he launched a brand new 00:29:51.069 --> 00:29:54.549 chain called Rooms Plus Spaces. He tried to fill 00:29:54.549 --> 00:29:56.789 that void in the market. I remember seeing the 00:29:56.789 --> 00:29:58.650 signs for that. It looked a lot like Bed Bath 00:29:58.650 --> 00:30:00.849 & Beyond, just with a different logo. But it 00:30:00.849 --> 00:30:04.420 failed. And it failed quickly. By January 2025, 00:30:04.799 --> 00:30:06.859 which is just over a year ago from where we sit 00:30:06.859 --> 00:30:10.059 now, all the rooms plus spaces locations were 00:30:10.059 --> 00:30:13.079 closed. It seemed like the physical big box home 00:30:13.079 --> 00:30:15.920 goods model was truly dead in Canada. However, 00:30:16.079 --> 00:30:18.579 and this is the news that has us talking in 2026, 00:30:18.839 --> 00:30:21.160 there is another revival happening right now. 00:30:21.299 --> 00:30:24.640 Yes. In the summer of 2025, Sleep Country Canada, 00:30:24.839 --> 00:30:27.500 the mattress giant, they purchased the rights 00:30:27.500 --> 00:30:29.799 to the Bed Bath & Beyond name in Canada and in 00:30:29.799 --> 00:30:32.539 the UK. And their plan, which they're executing 00:30:32.539 --> 00:30:35.140 as we speak, is to bring physical Bed Bath & 00:30:35.140 --> 00:30:37.980 Beyond stores back again. Okay, so let me just 00:30:37.980 --> 00:30:39.420 get this straight because it's confusing. If 00:30:39.420 --> 00:30:41.660 I'm in New York, Bed Bath & Beyond is a website 00:30:41.660 --> 00:30:43.880 run by the company that used to be Overstock. 00:30:44.099 --> 00:30:46.460 Correct. If I'm in Toronto, Bed Bath & Beyond 00:30:46.460 --> 00:30:48.660 is about to be a physical store run by the mattress 00:30:48.660 --> 00:30:51.230 company, Sleep Country. Also correct. And if 00:30:51.230 --> 00:30:53.569 I'm in Mexico. It's still the original Bed Bath 00:30:53.569 --> 00:30:56.529 & Beyond Mexico. It was a joint venture, so it 00:30:56.529 --> 00:30:58.930 remained legally independent and never went bankrupt. 00:30:59.069 --> 00:31:01.470 It's just trucking along down there like nothing 00:31:01.470 --> 00:31:03.990 ever happened. It is a multiverse of retail madness. 00:31:04.329 --> 00:31:06.670 It really challenges our definition of what a 00:31:06.670 --> 00:31:09.410 company actually is. Is it the people? Is it 00:31:09.410 --> 00:31:13.160 the buildings? The supply chain? Or is it just 00:31:13.160 --> 00:31:15.400 the logo and the font? That's the big question, 00:31:15.460 --> 00:31:17.059 isn't it? And it brings us to our takeaways. 00:31:17.380 --> 00:31:19.960 When we look back at this whole 50 -year saga 00:31:19.960 --> 00:31:23.759 from the very first bed and bath in 1971 to these 00:31:23.759 --> 00:31:27.440 fragmented zombie brands of 2026, what are the 00:31:27.440 --> 00:31:30.039 big lessons here? I think there are three critical 00:31:30.039 --> 00:31:33.180 lessons. The first, and maybe the biggest, is 00:31:33.180 --> 00:31:35.869 the danger of short -term thinking. specifically 00:31:35.869 --> 00:31:39.470 those stock buybacks. They spent $11 .8 billion 00:31:39.470 --> 00:31:42.109 buying their own stock to freeze Wall Street 00:31:42.109 --> 00:31:44.450 today. And they completely starved the business 00:31:44.450 --> 00:31:46.309 of the innovation and investment it needed for 00:31:46.309 --> 00:31:48.930 tomorrow. They ate their own seed corn. It's 00:31:48.930 --> 00:31:51.710 the perfect definition of it. The second lesson 00:31:51.710 --> 00:31:54.450 is the failure to adapt to e -commerce. They 00:31:54.450 --> 00:31:56.569 were just too late. They let Amazon get a 10 00:31:56.569 --> 00:31:58.609 -year head start. And when they finally did try 00:31:58.609 --> 00:32:01.349 to buy things like One King's Lane, it was too 00:32:01.349 --> 00:32:03.990 little too late. They treated the internet as 00:32:03.990 --> 00:32:06.910 a side project. Not the main event. And the third 00:32:06.910 --> 00:32:09.230 lesson. I think it's the loss of the experience. 00:32:09.910 --> 00:32:11.670 You mentioned the treasure hunt earlier. In the 00:32:11.670 --> 00:32:13.569 early days, you went to Bed Bath & Beyond because 00:32:13.569 --> 00:32:15.329 it was fun. You found things you didn't even 00:32:15.329 --> 00:32:17.849 know you needed. Yeah. By the end, it was a chore. 00:32:18.309 --> 00:32:20.710 The stores were messy. They were out of stock. 00:32:20.769 --> 00:32:23.089 And frankly, they were depressing. When you lose 00:32:23.089 --> 00:32:24.529 that emotional connection with your customer, 00:32:24.730 --> 00:32:27.349 when you become just another place to buy a towel, 00:32:27.509 --> 00:32:30.289 you're dead. Because I can buy a towel anywhere. 00:32:30.630 --> 00:32:33.920 And that leads me to... this reflection on brand 00:32:33.920 --> 00:32:37.339 equity because despite all of that failure despite 00:32:37.339 --> 00:32:39.940 the messy stores the bankruptcy the empty shelves 00:32:39.940 --> 00:32:43.000 the name bed bath and beyond was still worth 00:32:43.000 --> 00:32:45.299 millions and millions of dollars to overstock 00:32:45.299 --> 00:32:48.539 and to sleep country and that is the incredible 00:32:48.539 --> 00:32:53.099 power of nostalgia and habit that name has 50 00:32:53.099 --> 00:32:56.559 years of prime real estate in our brains it just 00:32:56.559 --> 00:32:58.819 means home Even if the business model completely 00:32:58.819 --> 00:33:01.660 failed, the label itself still carries a certain 00:33:01.660 --> 00:33:03.940 amount of trust. It's a shortcut for the consumer. 00:33:04.220 --> 00:33:06.559 Oh, Bed Bath & Beyond, I know them. They sell 00:33:06.559 --> 00:33:09.180 home stuff. I get it. Building that kind of recognition 00:33:09.180 --> 00:33:13.140 from scratch takes decades and a fortune. Buying 00:33:13.140 --> 00:33:16.539 it for $21 million is a massive shortcut. So 00:33:16.539 --> 00:33:18.859 here's my final provocative thought for you, 00:33:18.920 --> 00:33:21.619 the listener, to chew on. We now live in a world 00:33:21.619 --> 00:33:24.519 where Bed, Bath & Beyond exists as two, maybe 00:33:24.519 --> 00:33:27.160 even three, completely different realities, depending 00:33:27.160 --> 00:33:29.680 entirely on your GPS coordinates. It makes you 00:33:29.680 --> 00:33:32.700 wonder, is a brand a promise of a specific experience, 00:33:33.019 --> 00:33:34.980 or is it just a sticker we slap on inventory 00:33:34.980 --> 00:33:36.920 to make it sell? And if the sticker is all that 00:33:36.920 --> 00:33:39.140 really matters, does it even matter who is running 00:33:39.140 --> 00:33:41.160 the warehouse behind it? Something to think about 00:33:41.160 --> 00:33:42.599 the next time you're digging through your junk 00:33:42.599 --> 00:33:45.440 drawer looking for a 20 % off coupon that doesn't 00:33:45.440 --> 00:33:47.799 exist anymore. Thanks for diving deep with us. 00:33:47.980 --> 00:33:48.700 See you next time.