Why Bed Bath & Beyond is only worth $1, according to an analyst
Bed Bath & Beyond has entered the retail death spiral that pulled once-proud retail chains such as Sears and Circuit City into the grave, according to one analyst.
In a new note to clients on Friday, Loop Capital analyst and vocal Bed Bath & Beyond critic Anthony Chukumba reiterated a sell rating and $1 price target on the stock.
Shares rose 20% as of 1:10 p.m. ET in Friday's session on continued speculation that Bed Bath & Beyond is nearing a capital raise to bolster its dwindling cash coffers.
But a cash raise won't help, and the stock is toast, Chukumba said, echoing comments he made to Yahoo Finance Live after the company's dismal earnings report a few weeks ago.
"We also doubt a new ABL [asset-backed loan] would make Bed Bath & Beyond's vendors — who we continue to worry could place the company in a death spiral by demanding more onerous payment terms — any more comfortable about Bed Bath & Beyond's near and long-term prospects," Chukumba said.
A Bed Bath & Beyond spokesman didn't return Yahoo Finance's request for comment on Chukumba's latest hot take.
Bed Bath & Beyond in 'a world of hurt'
To be sure, Bed Bath & Beyond qualifies as a true retail disaster story ahead of the holiday shopping season.
In late June, Bed Bath & Beyond announced a quarterly loss of $224 million for its adjusted operating profits. The company ended the quarter with a mere $107 million in cash, which had analysts such as Chukumba concerned that vendors will tighten payment terms on the retailer — a move that would only lead to a quicker pace of cash outflow.
The retailer also said it saw same-store sales crash 27% at its namesake brand in the most recent quarter as shoppers pulled back on discretionary purchases. Shoppers also continued to shun the retailer after its misguided move to scale back on its popular coupons.
Along with the disastrous results, the company fired its CEO, Mark Tritton, who had joined Bed Bath & Beyond in 2019 after a successful stint as Target's chief merchandiser. Board member and retail veteran Sue Gove is now leading the company on an interim basis.
The story is so bad that Wall Street is questioning whether the company survives in its current form.
"Bed Bath & Beyond is in a world of hurt because they have burned an enormous amount of available cash, their business has no forward momentum, and now as we all know they have an enormous leadership gap that they will have to fill," Mark Cohen, Columbia University professor of retail studies and former long-time CEO of Sears Canada, said on Yahoo Finance Live. "I would not be at all surprised if they teeter-totter into a restructuring sometime in the beginning of 2023."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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