The rise and fall of Bed Bath and Beyond: From $14B to bankruptcy
In this narrated video essay, Michael Girdley chronicles the trajectory of Bed Bath & Beyond, an American retail chain that grew from a single New Jersey specialty store in 1971 to a $14 billion, 1,500‑store empire by 2019, before collapsing into Chapter 11 bankruptcy and being sold to Overstock in 2023. Girdley outlines the company’s early success built on the superstore model and a gamified coupon‑mailing strategy that turned shopping into a treasure‑hunt. He details aggressive expansion through acquisitions (Bye Bye Baby, World Market, etc.) and a culture of financial engineering, notably $11.8 billion in stock buybacks that left the firm cash‑poor. Founder‑centric decisions, family‑related bailouts, and poorly synergistic purchases further weakened the core business. The narrative then shifts to external pressures: the rise of e‑commerce (Amazon, Wayfair), digital advertising supplanting direct mail, and competition from Walmart and Target, all of which eroded Bed Bath & Beyond’s market share. Activist investors forced leadership changes, bringing in CEOs Mark Triton and later Sue Gove, who attempted store closures, private‑label rollouts, and a return to coupons, but these moves were too late. The company’s missteps were amplified during the COVID‑19 pandemic, when the shift to omnichannel shopping left it vulnerable, and the board continued share buybacks instead of investing in survival. A meme‑stock surge in 2022 driven by Ryan Cohen temporarily inflated the stock, followed by a crash and the tragic suicide of CFO Gustavo Arnal. By April 2023, with thin shelves, dwindling cash, and lost supplier confidence, Bed Bath Beyond filed for Chapter 11, and its assets and name were bought by Overstock for $21.5 million, oddly turning the former brick‑and‑mortar chain into an e‑commerce brand. Girdley concludes with a cautionary lesson: treating a business as a personal piggy bank and neglecting a financial war chest can precipitate collapse.
Chapters
Bed Bath Beyond went from a single specialty store in New Jersey founded in 1971 to a massive behemoth of retail that by 2019 was worth billions and had over 1,500 stores across every state in the United States. But just 6 years later, the chain closed down suddenly, declared bankruptcy, and the doors closed forever. So this video is about the rise and fall of an iconic American brand, Bed Bath Beyond. If you stick around for the entire video, I'll explain why I'm recording the hook for it in front of this nail salon/hair salon place with construction equipment in front of you. It may surprise you. My name is Michael and I make videos about the rise and fall of iconic American companies and teach you a little bit about business along the way. And today's video is actually sponsored by a company where I'm an investor and co-founder. It's called Near. It's a staffing and recruiting agency that helps American companies to hire great employees in Latin America. Besides the financial savings, the people you can find globally to work for your company are great. If you're interested, click the link that I'm showing on the screen now for 5% off your first hire. So Bed Bath Beyond got its start when two struggling entrepreneurs, Warren Eisenberg and Leonard Feinstein, left their jobs at a struggling general store discounter. And back then, general stores were the rage. They carried a bunch of a lot of different things. but didn't specialize in any individual thing. And as cities got bigger and the economy started to get bigger in the United States, the idea of specialty stores that would focus on just one area of sales and items, they started to become a thing. And these guys jumped in on the trend and it was perfect timing. Their stores would handle things like home goods. So knives, forks, spoons, blenders, rugs, bedding, all that type of stuff that, well, every house needed. And they rode this wave perfectly from their first store in 1971. By 1985, they had 18 stores across the Northeast and California. And the '80s saw a rise of a new type of store, the category killers. And these were superstores, in other words, bigger-sized specialty stores that would come in and be chains of identical store after store and come in, own that specific type of category, whether it be toys like Toys R Us or home goods like Linen 'N Things. And the two co-founders, they saw this trend happening and they jumped in with both feet. And opened up their very first Bed Bath and at that time Beyond in that time of 1985. And before this first superstore, they had named the chain Bed and Bath, but because they went beyond that, they called it Bed Bath and Beyond. And the store concept was an absolute hit. Uh, they would stack stuff floor to ceiling, and if you've ever been in a Bed Bath and Beyond, well, before they closed down, you would see that they were just like organized chaos, like just stuff stacked super deep and sold super cheap. And the '80s and '90s were also the golden age of direct mail advertising. That's when businesses would send mailers out to, well, basically everybody within a radius of their store. And the thing that Bed Bath Beyond hit on that was a genius thing was they turned the shopping at Bed Bath Beyond into a total game. And if you were around in the '80s and '90s and hung out with moms, they would often have a stack of the coupons, the 20% off coupons, the $5 off coupons. That Bed Bath Beyond would mail to them incessantly. I remember being a kid and it seemed like my mom was getting a Bed Bath Beyond coupon every single day in the mail. And so this idea of the coupons reminding people of Bed Bath Beyond and giving them a chance to find discounts and then the treasure hunt feel of the stores, well, it basically gamified the shopping. And I spoke to some ladies who used to shop a lot at Bed Bath Beyond in preparation for this video, and they were talking about how they would go in and they didn't even know if they needed anything. but they would leave with a shopping cart full of deals and they were just felt like they were winning a game. And to them, they loved it. So in 1992, the chain went public and by 1999 it had hit $1 billion in annual sales. And in the 2000s, the trend just continued. In fact, they started to buy up other brands. In 2007, they bought up Bye Bye Baby, and in 2012 they bought up a brand called Cost Plus World Market. It wasn't just a home goods chain anymore. It was a virtual conglomerate of different brands, all targeting kind of the same levels of consumers. And in 2008, Bed Bath Beyond got incredibly unbelievably lucky. Their biggest competitor and one of the firms that had spawned their idea, Linens 'n Things, went bankrupt. And this at its surface was a good thing for Bed Bath Beyond because suddenly they had the whole corner of the market to themselves. But the bad thing is it led them to complacency and the potential for, well, trouble down the road. In the early 2000s, things were starting to change around the chain as well, though slowly at first. And that was the rise of e-commerce. And you saw in Bed Bath Beyond, a chain that had won by having incredible selection and pretty good prices. But when Amazon started to get into the home goods market, you came in with a chain that had even better selection than they did and even better prices. And we haven't even started to talk about the rise of specialty retailers like Wayfair and folks like that who came in with even better selection than all of the above and sometimes even better prices. In the early 2000s, the founders were in their 60s. It was the twilight of their careers. Where once in the 1980s they had seen the world changing around them and created the superstore concept. Here in the early 2000s, they just didn't get the internet. And even the founders later on admitted it. Warren Eisenberg, one of the founders, quote unquote said, we just didn't get the internet. Yeah, that's definitely true. So while in the early 2000s, Target and Walmart and others were pouring billions into omnichannel and trying to learn e-commerce, and Amazon was coming in knowing e-commerce natively, The Bed Bath Beyond guys just kept doing more of what had got them to the success they'd had. They were stuffing their stores with even more merchandise, running even more specials, and just kind of doing more of the same thing. And this is common in the businesses that we see fail on this channel. While sometimes they manage to match what's changing in the world and they keep up with the changing times and change their business appropriately, the ones that fail are the ones that tend not to notice what's going around them. Or they just kind of ignore it. And that's what Bed Bath Beyond did. While the outside factors were definitely something affecting the chain, its internal things started to come for it as well. And starting in the early 2000s, the founders and the leadership got addicted to financial engineering. And over the decade through the early 2000s into the 2010s, they spent a staggering $11.8 billion on stock buybacks, including later on in the 2010s, they would take it even further than that. They would borrow in order to go buy stock on the open market. And what this did, unfortunately, was at a time when the chain should have been building up a safety net of cash, you know, to be able to weather bad times in the future, they were going into debt and basically setting themselves up to not be able to handle any rough spots in the road in the future. And stock buybacks are something shareholders tend to like. If you're a company buying back the stock, that means there's fewer shares out there, which means people with shares are basically having their share price go up. The founders and the founders' families and management, they're all people that like that kind of stuff. The problem is, is if you go too far, like Bed Bath Beyond did at the time, you're not able to reinvest in the business like you should be. In other words, creating omnichannel solutions and e-commerce and all that kind of stuff. And instead you're basically just putting money in your pocket. It's not good. But these weren't the whole picture of how the founders basically treated Bed Bath Beyond as their personal piggy bank. Remember how I told you back in 2007 that they bought the chain Bye Bye Baby and incorporated it into their own kind of bigger business as Bed Bath Beyond? Well, guess whose kids had started that business? Yeah, Mr. Feinstein's kids. And this type of kind of internal familial good guy dealing would prove to be a pattern the chain would do over and over again. Oftentimes when the kids of the founders or the majority shareholders would start companies, Bed Bath Beyond would be asked to bail them out and ship money to them, basically pushing even more money to the shareholders and original founders of the company. And their families. And over the early 2000s, the chain did even more kind of internal mistakes that set it back. They did a series of acquisitions that were definitely not any level of synergy with their existing chain by just buying into other retail concepts like the Christmas Tree Store. And as I talked about, Bye Bye Baby and Whole Goods Market and all this type of stuff, it was just not accretive to the core business that they should have been worrying about at the time. And instead of modernizing the business and working on e-commerce and understanding the internet and omnichannel, they instead were handing money to shareholders and buying businesses that basically, well, they'd been doing okay, but weren't businesses that were gonna prepare the chain for the new world that was coming. As the chain started to go into the 2010s, something else bad happened, which was the rise of digital advertising. And a lot of the rise of digital advertising came at the expense of traditional direct mail advertising. And over the period of the 2010s, the effectiveness of the direct mail coupons and advertisements that in general were being done by Bed Bath Beyond via mail, well, those went down by 25% over that decade. In other words, the golden goose of marketing, mailing out those coupons and turning shopping into a gamified, fun experience, it just wasn't going to work as well anymore. They could get away with all of this because the chain kept rolling. By 2011, the stock market had valued it at $14 billion. It had 1,100 stores. It was spitting off cash and it was growing quickly. So the stock market let them get away with it. Fortunately, the chain got lucky through the 2010s because we entered a vast period, a big period of economic expansion here in the United States. People were getting wealthier, cash was easy, and people were spending money like crazy. So the chain kept growing. Eventually it was on track to reach $12.5 billion a year in sales by 2017 and on track to open 1,500 stores total by 2019. The juggernaut, it seemed, had continued on and was keeping moving. In the 2010s, another basically competitor and headwind for the chain came out of nowhere, and that was Walmart and Target. And I've talked a lot about in this channel about how Target and Walmart basically started a process in the late '90s to double and triple the sizes of their stores. The reason was they wanted to grow and be able to get into categories that they hadn't before, like toys against Toys R Us. And in the case of Bed Bath Beyond, they wanted to get into home goods. And what you saw was as those store rollouts continued over the 2010s, more and more times mom or dad who was shopping, instead of making a special trip over to Bed Bath Beyond to get a blender, they'd just pick it up at Walmart or Target and not have to make an extra trip. Consumers were starting to vote with their feet. The 2010s saw the march through of e-commerce growth. So to put it in perspective, in 2002, 2% of all home goods were bought online. By 2019, that number had reached 30%. And if you're a big retailer like Bed Bath Beyond, having 28% of your market basically walk out the door and start ordering stuff on their phone is a headwind that's going to be very difficult to survive. By 2019, investors in the company had seen enough. It was a publicly traded company. So a group of activist investors, people who wanted to see change in the company and hopefully make money by increasing the stock price, they stepped up and got votes to make changes to the company. They eventually ousted 16-year veteran CEO Stephen Tomares, who had kind of presided all these missteps internally in the chain and missed these external things going on. And they pushed him out and they pushed out the founders too. By this point, the guys were in their 70s and 80s and they weren't even really active in the company anymore. They left. And at the time as well, Target was a darling of retail. The new investors brought in a new CEO, a man named Mark Triton, with the idea of becoming the CEO and Targetifying Bed Bath Beyond to success. So Mark was given a pretty tough job to do. Remember all those acquisitions the chain did and stuff that wasn't even kind of synergistic? He had stores that were in a muddled mess and the chain had grown too quickly over the 2000s. So Mark had a lot on his hands. So in the effort of mimicking Target's success, Mark closed underperforming stores, about 200 of them. He slimmed down the number of items that we carry inside of Bed Bath Beyond, making it less cluttered. And he got rid of the famous and beloved coupons that would go out by mail all the time. Mark also got rid of a number of brands that the chain was carrying in favor of carrying private label brands. The idea that, hey, you want Cellophane or a KitchenAid item? Well, good news. We have a cheaper and even better version that now has our own in-house brand with the idea of decluttering and simplifying the stores. But the bad news was these private label things were poorly implemented. They were of low quality. The launch of them was pretty poor. Customers didn't understand. They would come in the stores and say, hey, I want a KitchenAid, and then they would walk out when they didn't want to buy some random brand they'd never heard of before. And those 20% off and stackable coupons and gamifying stuff, when Mark took that stuff away, they realized pretty quickly that the customers had been trained to expect that shopping at Bed Bath Beyond was like a game, and they stopped allowing those folks to play the game anymore. And so they stopped coming in. Remember that Bed Bath Beyond has spent $11.8 billion buying back its own stock and taking on debt to do so. But suddenly the chain was left with a pretty weak balance sheet. And suppliers seeing this situation going on, the customers not coming in, same-store sales dropping, Well, many of them started to cut off the chain because they were worried about its potential viability. Remember, the chain had spent its entire potential war chest for tough times on buying back shares. So now it didn't have anything to fall back on. So the chain was remarkably ill-prepared for what would come next, which frankly should have been a really good thing for it, which was the COVID pandemic.
Effective today, all Bed Bath Beyond stores will be closed in an effort to help slow the spread of the coronavirus.
If you remember COVID, that was when we all spent a ton of time making our homes into like perfect nests, cuz we were spending all day every day there. But the way we had to shop was radically different than what we could do before. You couldn't go into stores, and that was what Bed Bath Beyond had bet its whole existence on doing. Instead, people were trying to do omnichannel, curbside pickup and delivery. And when the pandemic came around, what should have been like a huge boon for Bed Bath Beyond suddenly became horrible because customers got trained to go to Amazon and other places that knew how to sell in a world where you couldn't go into stores. And something that will drive people absolutely crazy hearing about this story and the loss of this beloved store was during 2020 and 2021, when sales were tanking and they were basically dying on the vine during the pandemic. Do you know what the board and the company kept doing? It kept buying back shares. It spent $1 billion of cash on hand buying more shares out on the open market. And that's money they could have used to, well, try to stay alive. Then Bed Bath Beyond got caught up in some of the craziest times in the stock market. Well, forever, because in 2022, a man named Ryan Cohen, who had started Chewy and was also the instigator behind the original meme stock GameStop, took a position in Bed Bath Beyond. When hearing this, the market propelled the stock up 300%. Well, that went great. People bought in, except the meme, unlike GameStop, didn't stick. And eventually, when Ryan Cohen dumped his entire position a few months later, the stock tanked. And this was not a harmless thing that people just lost money on. It also started to affect lives. And in 2022, the CFO of the company, Gustavo Arnal, mired in allegations that he had been part of the stock pump-and-dump scheme and was part of allegations he had done the wrong stuff. Well, he committed suicide by jumping out of a window.
In New York City, officials say the chief financial officer of Bed Bath Beyond jumped off the 18th floor of a skyscraper on Friday. 52-year-old Gustavo Arnal died from his injuries.
It was a sure sign that there was turmoil inside the company. And those of us watching the business from outside, man, we could see it too. In a last-ditch effort in 2022 to try to save the company, the board appointed a new CEO, a lady named Sue Gove. And she basically took the chain back to basics. The idea of bringing in brands, simplifying stuff, bringing back the coupons. But it was too little, too late. Suppliers didn't trust that the company was going to have cash to pay its bills. Shelves started to get thin and the chain was clearly in a death spiral, but it wasn't going to be able to get out of. With creditors not interested in putting any more money into the company, in April 2023, Bed Bath Beyond, that had been on life support for going on a year, finally threw in the towel and declared Chapter 11 bankruptcy. And at that point, the chain was basically a shell of its former self. While it had 1,500 stores at one point, only a few hundred remained and they all closed down for good. And I told you I would explain why I recorded the hook for this video in front of that J.C. Salon in a power center near me. Well, that one there was one of the last Bed Bath Beyond locations near me in San Antonio. So in a crazy twist of fate, the name Bed Bath Beyond has actually finally become an e-commerce name. The company formerly known as Overstock.com swooped in and for $21.5 million bought the assets and the name and the domain name for Bed Bath Beyond and rebranded itself as Bed Bath Beyond. And ironically, the company that could never figure out e-commerce finally figured out a way to figure it out. Just had to basically disappear to get there. The big takeaway for me from this story for sure is avoid the temptation to treat your business as a personal piggy bank. And I see people talk about these schemes all the time with their small business to say avoid taxes, like put your boat on the expenses, basically cut yourself all these sweet deals. It turns out that's just short-term thinking and stuff you shouldn't do. And you could see the founders did it here. And ultimately, if the business had had a basically a war chest to be able to approach these tough times in the late 2010s, we'd probably all still being— be buying pillows and throw pillows and blenders at Bed Bath Beyond. And I love that place and I love the coupons and it makes me sad to see it going. All right, if you like this video, leave me a comment below saying you liked it. It'll encourage me to make more. And let me know what you would have done differently at Bed Bath Beyond. I know a lot of folks watching these videos are passionate about it because it's been the number one video I've been requested to make, and frankly, it's a pretty fascinating story. All right, let me know your thoughts right in the comment below. I try to read them all. See ya.
