Signage is seen at a Bed Bath & Beyond store in Manhattan, New York City
Signage is seen at a Bed Bath & Beyond store in Manhattan, New York City, U.S., June 29, 2022. Reuters

Shares of Bed Bath & Beyond Inc plunged about 25% on Monday after the home goods retailer's long fight to save its business ended in bankruptcy.

The once high-flying company filed for bankruptcy protection on Sunday and said it had launched a liquidation sale after failing to secure funds to stay afloat.

Bed Bath & Beyond also plans to use Chapter 11 proceedings to seek outside buyers who could keep the business going or purchase discrete assets such as the company's 125 baby merchandise stores operated under the buybuy Baby brand.

The company received a U.S. bankruptcy judge's permission on Monday to borrow $40 million to stabilize its operations and buy time for an orderly sale process.

A botched merchandising strategy, lower spending by inflation-hit Americans and stiff competition from rivals such as TJX's TJ Maxx and Target Corp drove the business under as losses mounted and it ran out of cash.

"It was deteriorating before COVID, COVID pushed it over the edge. It was mismanaged during COVID, using the remaining cash to buy back stock versus keep a respectable inventory in the store that would attract clients," said Thomas Hayes, chairman and managing member at Great Hill Capital.

But Bed Bath's downfall is not viewed as a sign of weakness in the broader retail sector. Analysts said some companies, including Walmart Inc, Inc, Target and Williams-Sonoma Inc, stand to gain share and a marginal benefit to revenue.

On Monday, Bed Bath & Beyond was the second-most active stock on Stocktwits, a website popular with individual investors.

Its notes maturing in 2024 remained under pressure, falling around $3 on Monday and pushing the yield to a record high of more than 450%.

U.S. shares of the company pared some premarket losses to trade at 21 cents.

Bed Bath also named interim finance chief Holly Etlin as its new CFO. A bankruptcy expert, Etlin will also oversee the liquidation and sale processes.