BBBY Stock: Bed Bath & Beyond Surges Ahead of Turnaround Plans
August 31 2022 - 7:22AM
Finscreener.org
Shares of Bed Bath
and Beyond (NASDAQ:
BBBY) are up over 11% in pre-market trading today
after gaining 24% on August 29. While BBBY is
a popular meme
stock, investors are now
optimistic about the company’s turnaround plan, which will be
announced shortly.
The home goods retailer secured
$375 million in loan financing and is expected to discuss its
restructuring plans this week, which includes the potential sale of
the highly lucrative buy buy Baby business.
Bed Bath and Beyond shares have
been extremely volatile, falling from $76 in January 2015 to less
than $4 at the onset of COVID-19. However, retail traders initiated
a short squeeze last year, driving share prices to $35 in January
2021.
Ryan Cohen sells stake in Bed Bath &
Beyond
A few months ago,
Chewy’s (NYSE:
CHWY) founder Ryan Cohen
revealed a 10% stake in Bed Bath via his activist firm. According
to FactSet, Cohen’s holdings stood at 11.8% at the end of March
2022.
Cohen had then believed Bed Bath
was wrestling with falling market share and supply chain
inefficiencies. He also urged Bed Bath to sell the buybuy Baby
segment.
In June, Bed Bath replaced its
CEO with Sue Gove, a restructuring expert, at the helm. But the
company continued to report less than impressive results
disappointing investors in the process. It also burned cash at an
accelerated pace, resulting in liquidity issues.
Bed Bath’s sales have fallen from
$12 billion in fiscal 2019 (ended in February) to $7.86 billion in
fiscal 2022. Due to the erosion in the top line, it reported an
operating loss of $471 million in the last 12 months, compared to
an operating income of $422 million in 2019.
Bed Bath ended the fiscal Q1 of
2023 with a cash balance of $108 million, compared to $1.1 billion
in the year-ago period. Its net losses widened to $358 million
compared to a loss of $51 million in Q1 of 2022.
But earlier this month, Cohen
confirmed he intends to sell his entire stake in Bed Bath via his
firm RC Ventures, which sparked a sell-off in BBBY stock a few days
back.
What next for BBBY stock price and
investors?
Bed Bath’s coffers are quickly
drying up ahead of the extremely busy holiday season and the
back-to-school periods. But due to the meme stock mania in recent
week, BBBY stock has more than doubled in the last month. Its
trading volumes surged over 400 million in a single session last
week and it might remain volatile in the near term.
Mark Tritton, the former CEO of
Bed Bath, replaced Steven Temares in 2019. Tritton soon tried to
revamp the company by closing down loss-making stores, divesting
non-core banners, expanding digital sales, and reducing inventory
levels.
But the ongoing pandemic soon
impacted this recovery and Bed Bath was soon hampered by rising
costs and supply chain headwinds.
BBBY ended Q1 with an adjusted
gross margin of 23.8%, compared to almost 35% in the year-ago
period. Comparatively, its long-term debt stood at $1.38 billion,
rising 17% year-over-year.
While investors are patiently
waiting for a turnaround plan, Bed Bath continues to grapple with
falling sales and negative profit margins. Analysts now expect
sales to fall by 17.4% to $6.5 billion in fiscal 2023 while
adjusted loss might expand to $6.04 per share from losses of $1.08
per share in the year-ago period.
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