Why Bed Bath & Beyond is only worth $1, according to an analyst

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Bed Bath & Beyond has entered the retail death spiral that has dragged once-proud retail chains such as Sears and Circuit City to the grave, an analyst says.

In a new note to clients on Friday, Loop Capital analyst and Bed Bath & Beyond vocal critic Anthony Chukumba reiterated a sell note and $1 price target on the stock.

Shares rose 20% at 1:10 p.m. ET in Friday’s session on continued speculation that Bed Bath & Beyond is nearing a capital raise to bolster its sagging cash coffers.

But a raise in funds 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 suppliers – who we still fear could put the business into a death spiral by demanding more onerous payment terms – more comfortable with the short and long-term outlook of Bed Bath & Beyond,” Chukumba said.

A spokesperson for Bed Bath & Beyond did not respond to Yahoo Finance’s request for comment on Chukumba’s latest shot.

Bed Bath & Beyond in ‘a world of suffering’

To be sure, Bed Bath & Beyond qualifies as a true retail disaster story ahead of the holiday shopping season.

At the end of June, Bed Bath & Beyond announced a quarterly loss of $224 million for its adjusted operating profits. The company ended the quarter with just $107 million in cash, which has analysts such as Chukumba worried that sellers will tighten the retailer’s payment terms – a move that would only accelerate the pace of cash outflows. .

Shoppers are seen outside a Bed Bath & Beyond store in Orlando, Florida on April 13, 2019, as the company plans to close 40 stores due to falling sales while opening 15 more. (Photo by Paul Hennessy/NurPhoto via Getty Images)

The retailer also said it saw same-store sales drop 27% at its namesake brand in the last quarter as shoppers reduced discretionary purchases. Shoppers also continued to avoid the retailer after its misguided decision to cut 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 head of distribution at Target. Sue Gove, board member and retail veteran, is now running the business on an interim basis.

The story is so bad that Wall Street wonders if the company survives in its current form.

“Bed Bath & Beyond is in a world of pain because they’ve burned through a tremendous amount of free cash, their business has no forward momentum, and now, as we all know, they have a huge leadership void that they will have to fill,” Mark Cohen, a professor of retail studies at Columbia University and former longtime CEO of Sears Canada, said on Yahoo Finance Live. “I wouldn’t be at all surprised if they go through a restructuring in early 2023.”

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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