Why is This Failing Retailer Surging? |
Perhaps the last stock from the January 2021 meme stock craze — now 2 years ago — to consistently hit the headlines is retailer Bed, Bath, and Beyond (BBBY).
This retailer couldn’t even manage to take advantage of online shopping when everyone was locked at home in 2020-2021…
So when the rate hikes kicked off after reopening the economy, it suffered even worse.
Former CEO Mark Triton was supposed to save the company and failed, so they replaced him with current CEO Sue Gove.
Even Ryan Cohen, the activist investor of Chewy and GameStop fame, bailed on BBBY in the summer of 2022…
Mere months after grabbing a ton of shares.
The past few days brought even more bad news for BBBY:
First, Reuters reported last week that BBBY is considering skipping debt payments due February 1… and looking at filing for bankruptcy soon. |
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The retailer reported that in Q4 2022, it saw a quarterly loss much larger than it had anticipated…
To the tune of $393 million, vs. the $385.8 million they expected.
I bet a massive loss, but smaller than what they expected, would’ve been met with some optimism…
But they couldn’t do it.
This perhaps validates its latest move:
Plants to shutter 34 stores in the key states of New York (the Tri-State area), New Jersey, Connecticut, and California.
For comparison: Yahoo Finance says BBBY will operate 71 stores in California after the closures.
Meanwhile, competitors Target and Walmart will have 314 and 321 stores, respectively.
Plus, CEO Sue Gove explained on an earnings call that BBBY will cut more corporate workers.
This matches earlier plans to lay off about 20% of its corporate and supply chain staff and shutter around 150 stores to slash costs and stay afloat… |
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Yet BBBY has surged this entire week.
It was up almost 50% today, and even more since Monday.
Reuters reports that BBBY was among Fidelity’s top three traded stocks yesterday.
Victoria Scholar, Interactive Investor’s head of investment, explains why:
"Speculation (that) Bed Bath & Beyond could be an M&A target for an opportunistic buyer, combined with its cost cutting measures have helped support the stock," she said.
Acquisitions tend to benefit existing stockholders in the short term regardless of how well the acquirer does with its new company.
But Scholar also pointed out that “the risk of bankruptcy remains and the stock is still down 60% over the last 6 months.”
Such uncertainty makes it riskier for investors betting on an acquisition, too. If the acquisition doesn’t happen, they might be left holding the bag. |
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