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Bed Bath & Beyond (BBBY) Reddit-fuelled rocket ride draws warnings of ‘unrealistic’ BBBY stock price

16:00, 17 August 2022

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A Bed Bath & Beyond store in North America
Bed Bath & Beyond stock price soars on BBBY-Reddit meme stock interest – Photo: Shutterstock

A US home retailer’s stock has soared in recent days on the back of renewed retail investor interest as some analysts called for caution.

Bed Bath & Beyond (BBBY) stock was up 20% in US pre-market trading on Wednesday. For the month of August, the stock is up a spectacular 313%.

Founded in 1971, the company sells a wide assortment of merchandise in the home, baby, beauty and wellness segments.

Bed Bath & Beyond (BBBY) stock price

“We believe BBBY is currently trading at unrealistic valuations,” B.Riley analyst Susan Anderson wrote in a note quoted by MarketWatch.

“BBBY has recently gained the attention of retail traders in the Wall Street Bets Reddit forum again, which gained notoriety during the GameStop saga back in January 2021.”

Anderson’s firm has downgraded the stock to Sell.

Earlier this year the retailer reported poor quarterly earnings that led to the departure of CEO Mark Tritton, who had joined the company in 2019 from rival Target (TGT).

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Target (TGT) stock price

Recent performance

Earlier this year, former CEO Tritton explained that supply chain issues had negatively impacted earnings for the pre-Christmas shopping season.

“Unfortunately, despite strong customer demand, operational challenges such as vendor constraints locked inventory and our current ill-equipped legacy infrastructure impacted our ability to drive further improvements in sales trends,” Tritton explained in a January conference call.

By the time of its fiscal first-quarter earnings in June, the situation hadn’t improved.

Slide showing key Q1 data for Bed Bath & BeyondBed Bath & Beyond

Citing inflation pressures and ongoing supply-chain problems, fiscal first-quarter revenue totalled $1.46bn (£1.2bn, €1.44bn) for a $358m net loss, or $4.49 per share, worse than the $1.28 per share loss that analysts had been expecting.

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Additionally, the retailer only had $107.5m of cash on hand, down 90% from the $1.097bn it had on its balance sheet a year ago.

“In the quarter there was an acute shift in customer sentiment and, since then, pressures have materially escalated. This includes steep inflation and fluctuations in purchasing patterns, leading to significant dislocation in our sales and inventory that we will be working to actively resolve,” interim CEO Sue Gove said in a statement.

“The simple reality though is that our first quarter's results are not up to our expectations, nor are they reflective of the company's true potential.”

Slide showing Bed Bath & Beyond's outlookBed Bath & Beyond

Ryan Cohen to the rescue?

Step forward entrepreneur Ryan Cohen. In March he disclosed an 11.8% stake in Bed Bath & Beyond and sent a letter to management outlining the company’s underperformance and suggesting possible remedies.

Cohen gained a social media following after taking a significant stake in North American video games retailer GameStop (GME) in 2020, joining the board in early 2021 at the same time as retail investor interest surged in the company on social media site Reddit.

 

Cohen eventually became chairman of GameStop in June 2021 and the brick-and-mortar retailer is adding other digital products to its consumer offering. He is also the founder of online pet retailer Chewy (CHWY).

Bed Bath & Beyond is no stranger to activist investors.

In 2019, hedge funds Legion Partners, Macellum Capital Management and Ancora Advisors sent a joint 150-page letter outlining the company’s underperformance under CEO Steven Temares and submitted a list of alternate board members.

Bed Bath & Beyond is due to update investors in its fiscal second-quarter earnings in September.

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