KeyBanc Capital Markets analyst Bradley Thomas says that Bed Bath & Beyond Inc. (NASDAQ: BBBY) stock is worth 10 cents. This comes after The Wall Street Journal said the company would file for Chapter 11. Thomas previously had a price target of $2, according to Bloomberg. The shares traded at $1.48 in the premarket Friday.
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Thomas is right. Sales are falling too quickly, along with store count, for Bed Bath & Beyond to exist in its current form. That balance sheet is too poor to support the company for more than a few months. Some inventory suppliers refused to deliver before Christmas because they believed they would not be paid. Under all these circumstances, the story of its demise is already written.
One core assumption about Bed Bath & Beyond’s figure is that revenue declined last quarter. Revenue is expected to have dropped by over 20% again. That will be about the same pace as in recent months. Bed Bath & Beyond has closed stores to reduce costs at a pace that might make it profitable. The challenge is that the fewer stores it has, the smaller the footprint of stores near consumers. (See which 21 companies are making the most profit per second.)
Bed Bath & Beyond has restructured its balance sheet to give it more cash. But this has come at a horrible price. Some of the debt carries interest rates as high as 12%. It is unimaginable that the company can ever pay this off. The resurrection of its fortunes would need to be staggering.
The stock market has already voted on Bed Bath & Beyond’s future. It is a penny stock. It has dropped from a 52-week high of $30.06. Most of that crash started in August when its financial reports turned ugly. After that, Bed Bath & Beyond did not have one piece of good news to lift the price. The decline has accelerated since then.
As if the problems were not bad enough, the U.S. Securities and Exchange Commission has sent requests to the company about disclosure of supply chain problems and store traffic. The letter read, “Please specify whether these challenges have materially impacted your results of operations or capital resources and quantify, to the extent possible, how your sales, profits, and/or liquidity have been impacted.”
Bed Bath & Beyond management has to worry about what will happen to its stores, inventory, brand and workers.
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