While Bed Bath & Beyond Inc.’s closure of Canadian retail stores is small in comparison to past examples like Sears Canada or Target Canada, it’s still one of the largest retail failures in recent years, according to Sam Damiani, equity research analyst at TD Securities Inc.

In a note to clients on Monday, Damiani said Bed Bath & Beyond’s shuttering of Canadian brick-and-mortar stores will have a “slightly negative impact” on the Canadian retail leasing market.

“BBBC's (Bed Bath & Beyond Canada’s) 65 stores represent an estimated 1.7 million square feet, or 0.3 per cent of total retail space in Canada,” Damiani said in the note.

“Although small in relation to past retail failures such as Target Canada and Sears Canada, this still represents one of the largest in recent years.”

But he said the recent string of store closures is not necessarily an indication of overall weakness in Canada’s retail leasing market. 

“Based on the overall health of Canada's retail leasing market and BBB's (Bed Bath & Beyond’s) unique circumstances, we do not see this as being indicative of a coming wave of meaningful failures or store closures in Canada,” he explained.

“We also see most of the expected vacancies being back-filled over the near/medium term.”

Damiani called the news about Bed Bath & Beyond Canada shutting down its stores “unsurprising,” and said landlords “have had time to consider options, including holding discussions with potential replacement tenants.”

CREDITOR PROTECTION

Last week, Bed Bath & Beyond Canada was granted an initial order for creditor protection by the Ontario Superior Court of Justice.

Documents posted to the court-appointed monitor Alvarez & Marsal Canada Inc.'s website showed the retailer posted a $99.5 million net loss for the nine-month period ending Nov. 26, 2022. The documents added that the parent company is no longer able to give financial support to the Canadian division.

“BBBC's (Bed Bath & Beyond Canada’s) fate is not surprising, given the weak performance and repeated largescale store closures by its U.S. parent in recent years,” Damiani said.

Last August, the retailer announced in a press release that it would make strategic changes “intended to meet the demand of its customers, drive growth and profitability, and improve its balance sheet and cash flows.”

“The Company has identified and commenced the closure of approximately 150 lower-producing Bed Bath & Beyond banner stores,” the U.S.-based company said in the release.

“The Company continues to evaluate its portfolio and leases, in addition to staffing, to ensure alignment with customer demand and go-forward strategy.”