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Down 54% in six months, what’s next for Bed Bath & Beyond’s stock?

[Note: BBBY fiscal year ends February]

After a massive 54% decline over the past six months, at the current price of around $8.50 per share, we believe Bed Bath Stock and Beyond (NASDAQ: BBBY), the home goods retailer, could drop further. BBBY stock has fallen from around $18 to $8.50 since the start of 2022, far more than the 11% drop in the S&P index. This stock decline can be attributed to the current macroeconomic environment and the company’s poor financial performance. The retailer saw sales decline 15% year-over-year (yoy) in fiscal 2021. In fact, BBBY’s revenue has been steadily declining for the past five years, with margins have steadily contracted over the past ten years and its profitability has remained stable. the negative for the last four years.

Lack of inventory is currently an issue at Bed Bath & Beyond due to supply chain bottlenecks and purchasing difficulties. To add to this, the ongoing tension in the Eastern European region is expected to further aggravate the situation in the coming quarters. Considering that FY21 ended on February 26, it is important to mention that most of the impacts of political tension in Eastern Europe have not yet been reflected in these results. At the end of FY21, the company’s total cash was approximately $440 million (down from $1.4 billion a year earlier) with debt totaling more than $3 billion. Refinancing this debt will be quite difficult if profitability does not improve significantly in the future.

In the fourth quarter of 2021, Bed Bath & Beyond’s net sales fell 22% year-over-year to $2 billion, due to a 12% drop in comparable sales. Additionally, the company’s net income suffered, falling from a profit of $47 million a year ago to a loss of $82 million (-$0.92 per share). Inflation, supply chain disruptions and rising gasoline prices have had a significant impact on BBBY’s business, dramatically increasing expenses and, as a result, reducing margins.

We plan Bed bath and beyond Revenue to $7.27 billion in fiscal 2022, down 8% year-on-year. On the bottom line, we now expect the earnings per share (EPS) estimate to be $73.25. Given changes to our revenue and RPS forecasts, we have revised Bed Bath & Beyond Review at $8 per share, based on an expected RPS of $73.25 and a P/S multiple of 0.1 for fiscal year 2022. That said, the company’s shares look expensive at current levels , with a modest 5% discount from the current market price.

BBBY is undergoing a transformation that began in 2021, which aims to fundamentally rebuild the company. Although efforts are aimed at improving technologies and long-term supply chains, we have yet to see results. The retailer’s financial performance poorly reflects its execution, casting doubt on its ability to turn the tide. Additionally, management said in its fourth quarter earnings call that it would continue its turnaround plans, rejecting Ryan Cohen’s proposal to sell buybuy BABY. We believe slowing demand, inventory shortages and low cash will lead to another large loss in the first quarter and prevent BBBY from recovering its business. The company also doesn’t expect a significant improvement until the second half of this fiscal year, at best.

Here you will find our previous coverage of Bed Bath & Beyond’s stock where you can follow our vision over time.

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Return June 2022
MTD [1]
YTD [1]
Total [2]
BBBY Back -3% -43% -79%
S&P 500 return -1% -14% 83%
Trefis Multi-Strategy Portfolio 0% -19% 219%

[1] Cumulative monthly and cumulative annual as of 02/06/2022
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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