Bed Bath & Beyond Inc.’s liquidation plan may weigh on one source of U.S. retail profits in the short term as the market is inundated with liquidated home and baby products — but it leaves a long-term prize of about $5 billion in annual revenue for competitors.

Once deep discounts from Bed Bath & Beyond’s and Buy Buy Baby’s closing sales are over, Target Corp. is a likely beneficiary, Piper Sandler analyst Edward Yruma said in an April 24 note to clients. Target is in line for an eventual boost of about 40 cents a share to annualized earnings, he said. Amazon.com Inc. and Walmart Inc. will also pick up more sales.

“We believe that we are entering a new phase of retail industry consolidation and that Target and Walmart will be long-term share beneficiaries,” Yruma said.

The liquidation will accelerate market-share gains that rivals have been grabbing for years at Bed Bath & Beyond’s expense. Once lauded as a category killer in home furnishings, the retailer has watched as annual sales tumbled to a little more than $5 billion, down from more than $12 billion for the fiscal year ending in early 2019. After filing for bankruptcy protection over the weekend, Bed Bath & Beyond is winding down 360 stores and 120 Buy Buy Baby shops by June 30.

While Bed Bath & Beyond hasn’t reported results for its most recent fiscal year, sales in its fiscal fourth quarter fell by almost $1 billion, Holly Etlin, the company’s chief restructuring officer, said in a court filing. That would imply revenue of a little more than $1 billion for the period, bringing the annual total to approximately $5.2 billion. Bed Bath & Beyond estimated that aggregate net proceeds from all sales of its remaining goods will be approximately $718 million.

Other retailers benefit

Minneapolis-based Target is positioned to get $500 million to $1 billion in extra sales thanks to the void left by Bed Bath & Beyond, said Michael Baker, an analyst at D.A. Davidson & Co. That would still represent a relatively small part of the $19.5 billion that Target sold in home furnishings and decor in 2022, which was an off year for the category. Consumers pivoted away from discretionary goods last year after gorging on such products when stuck at home for much of 2020 and 2021.

Smaller companies such as Williams-Sonoma Inc. will also benefit long term from Bed Bath & Beyond’s exit, Bank of America Corp. said in a report. Wayfair Inc. and Overstock.com Inc. will probably get a modest sales boost.

Bed Bath & Beyond said it’s still searching for a buyer for some or all of its assets, so some parts of its business may stick around in one form or another. A shutdown of Buy Buy Baby would leave the U.S. without a national retailer dedicated to selling baby goods, giving rival companies another category to potentially pounce on.

“There really is no one doing that, at least on a national scale,” Baker said, referring to baby-related merchandise. “That means opportunities for mom-and-pops and online solutions, although we never really knew the profitability of it.”

Bed Bath & Beyond ranked No. 47 in the Top 1000 in 2022. Walmart is No. 2 in the Top 1000, behind Amazon, and Target is No. 5.

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