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Bed Bath & Beyond Is Circling the Drain

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Bed Bath & Beyond Is Circling the Drain

Key Points

  • Bed Bath & Beyond could file chapter 11 bankruptcy this week. 
  • The company has failed to find a buyer and store closing are not enough. 
  • No matter what happens, this market is in for some volatility. 
  • 5 stocks we like better than Bed Bath & Beyond

Shares of Bed Bath & Beyond NASDAQ: BBBY are circling the drain and may fall through very soon. Attempts to stave off bankruptcy, including a search for potential buyers, are coming up short. The latest word on the street is that a Chapter 11 bankruptcy filing could come as soon as this week.

The company is reportedly prepping to close another 87 stores on top of the 150 it has already closed so it doesn’t look like there is much hope

What is Chapter 11? According to the US legal code, Chapter 11 is a reorganizational bankruptcy that protects the company from creditors while creating a new business plan. If successful, the new Bed Bath & Beyond will emerge as a stronger company with at least an avenue for profitability. If not, Bed Bath & Beyond could be facing a full liquidation of its assets and that could have far-reaching implications for the rest of the retail sector. 

Who Wins When Bed Bath & Beyond Goes Out Of Business 

The question of who will win when Bed Bath & Beyond goes out of business is tricky to answer because what business is left is highly questionable. The company has been facing increasing competition from bigger box retailers like Target NYSE: TGT and Walmart NYSE: WMT which is why it is going out of business. The good news is that annual revenue is still running in the range of $5 billion, so there is a pie to be divided.

At face value, Walmart and Target are the most likely recipients of new business, but there are others. In the case of Walmart, absorbing BBBYs entire business would be worth less than 1% of growth, so it is unlikely it will make any major moves. Target, on the other hand, would see closer to 5% growth if it absorbed the entire business so it is more likely to lean into home furnishings and kitchen supplies.


Wedbush analysts Seth Basham sees Wayfair NYSE: W as a potential recipient of BBBY business. In his view, the home furnishings industry will see about a 3.0% decline in 2023, but Wayfair will not. He predicts that Wayfair will grow in the no-growth environment as it gains market share, and this could be boosted by BBBY business.

He upgraded Wayfair stock to a buy because of it, but there is risk in this outlook. The risk is that Wayfair’s offerings may be in a different league than Bed Bath & Beyond’s core customer. 

Off-Price Retail Will Be The Biggest Winners 

The biggest winners from Bed Bath & Beyond’s demise will be the off-price retailers, and the reason is threefold. First, these companies will be able to pick up massive amounts of inventory at rock-bottom prices, which is good inventory. Bed Bath & Beyond may not be a top-tier retailer anymore, but the brands under its roof are.

The second is that they will, in fact, get more traffic to their home goods sections, how much depends on location and effort but some for sure.

The third is labor. The influx of employees looking for jobs in retail will help those still in business flesh out their workforces and they need it badly. Names on this list include The TJX Companies NYSE: TJX, Kohl’s NYSE: KSS, Ollie’s Bargain Outlet NASDAQ: OLLI and Ross Stores NYSE: ROST

The Technical Outlook: Volatility Is On Deck 

No matter what happens, volatility is assured for the BBBY market. Not only is institutional involvement still high at 64% but the short-selling is very, very high at a similar 65%. In this light, good news could spark a short-squeeze but bad news could send the stock to $0 under the pressure of short-selling and institutional exodus. This is not a stock for the faint of heart to own. 

Bed Bath & Beyond Is Circling the Drain

Should you invest $1,000 in Bed Bath & Beyond right now?

Before you consider Bed Bath & Beyond, you'll want to hear this.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Kohl's (KSS)
3.8921 of 5 stars
$27.27+0.4%7.33%9.57Hold$23.50
TJX Companies (TJX)
4.4365 of 5 stars
$101.46+0.0%1.48%25.18Moderate Buy$110.05
Ross Stores (ROST)
4.8427 of 5 stars
$139.10+1.1%1.06%23.46Moderate Buy$156.58
Ollie's Bargain Outlet (OLLI)
3.3558 of 5 stars
$79.37+0.6%N/A27.18Moderate Buy$87.08
Wayfair (W)
4.1498 of 5 stars
$58.10-2.5%N/A-10.84Moderate Buy$77.83
Walmart (WMT)
4.3314 of 5 stars
$64.94-0.2%1.28%27.79Moderate Buy$68.01
Target (TGT)
4.7632 of 5 stars
$147.74+0.4%2.98%16.58Moderate Buy$180.41
Bed Bath & Beyond (BBBY)
0.1701 of 5 stars
$0.08flat861.85%-0.01N/A
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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