To avoid any confusion regarding the prospects of embattled retailer Bed Bath & Beyond (NASDAQ:BBBY), it’s best to be upfront: the meme dream for BBBY stock is over. Simply put, the underlying enterprise features too many challenges against an uninviting backdrop for the consumer economy. Therefore, I am bearish on the once-proud retail giant.
Essentially, the company lacks a credible and viable directive to move forward. While management implemented multiple actions and secured deals, the kinesis sadly resembles desperation moves. Surely, no one should fault Bed Bath & Beyond’s leadership team for throwing everything and the kitchen sink. At the same time, no one should be confused about the realistic prospects for BBBY stock.
BBBY Stock Stumbles Despite Best Efforts
Although the headlines demonstrate clearly that management implemented its best efforts to kickstart BBBY stock, the company runs into a problem: the market simply doesn’t care. Indeed, the crisis for the troubled retailer centers on the very real possibility that investors see through the cynicism.
For example, Bed Bath & Beyond secured a $120 million merchandising lifeline. For context, one of the reasons the retailer struggled was because it lacked products to put on its barren shelves. Thus, the arrangement with ReStore Capital should be a boon for the business.
Instead, BBBY stock continued to print red ink. Basically, investors likely viewed the underlying agreement as a desperation ploy to buy some time. With other viable options available for capitalization opportunities, market participants exited BBBY.
More recently, the company announced a special shareholders’ meeting on May 9 for voting on a reverse share split. Theoretically, such an action should be helpful. At writing, BBBY stock trades in literal penny stock territory. Basically, it must move up to a minimum of $1 per share to stay listed on the Nasdaq exchange (NDX).
However, BBBY stock continued to lose traction. In the five sessions ending April 6, shares tumbled by more than 43%. Again, it’s likely that investors recognize the reverse-split proposal for the cynical ploy that it is.
No One Trusts Bed Bath & Beyond
Another massive dilemma facing Bed Bath & Beyond centers on trust or lack thereof. Of course, a key reason (perhaps the only reason) that management hasn’t been able to secure inventory for its store shelves centers on concerns by its product suppliers. If the retailer goes bankrupt, the suppliers will then become unsecured creditors.
By logical deduction, if Bed Bath & Beyond wants to promote the semblance of being a legitimate retailer, it must put up cash upfront. Already, that’s a substantial obstacle for the enterprise. Since Fiscal Q1 2022, liabilities have outpaced assets on the company’s balance sheet. It’s stuck in a downward spiral with little hope of recovery.
Moreover, Bed Bath & Beyond’s better-capitalized competitors don’t have to worry about such a problem. Product suppliers trust them so they can keep their store shelves stocked, and that merely adds woes to BBBY stock as consumers learn to ignore the Bed Bath & Beyond brand.
If that wasn’t enough, the recent bank failures present a credibility dilemma for BBBY stock. Here’s the bottom line. Both individual and corporate depositors learned that some of the biggest financial institutions cannot be trusted. Therefore, why would anybody trust Bed Bath & Beyond?
It goes without saying that BBBY stock suffers from terrible financials. Aside from the balance sheet (where its equity-to-asset ratio has gone slightly negative), the company lacks in other critical areas.
Operationally, Bed Bath & Beyond’s three-year revenue growth rate (on a per-share basis) sits at -4%. This stat ranks worse than 68.54% of companies listed in the cyclical retail industry. Further, its book-value-per-share growth rate during the same period is 52.1% below zero. That’s worse than nearly 98% of its rivals.
Naturally, Bed Bath & Beyond suffers from a lack of a realistic pathway to profitability. For instance, its operating margin sits at -15%, and its net margin is -20.54%.
Is BBBY Stock a Buy, According to Analysts?
Turning to Wall Street, BBBY stock has a Moderate Sell consensus rating based on zero Buys, zero Holds, and two Sell ratings. Interestingly, the stock does not have a price target from the two analysts.
The Takeaway: BBBY Stock is Delaying the Inevitable
While it’s too early to play the role of coroner for BBBY stock, it could very well go to zero. Fundamentally, no one trusts the embattled organization. Further, management’s desperate moves will only delay the inevitable. Perhaps worst of all, investors clearly got the memo, meaning it’s time to jump ship.