Because of the severe drawdown in Bed Bath & Beyond (NASDAQ:BBBY) stock, it’s understandable if some shareholders are thinking about selling.
If you’re in too deep as a Bed Bath & Beyond investor, it’s not a bad idea to reduce your position. After all, you don’t always have to stick with a company through thick and thin, especially when that company has major financial problems.
Bed Bath & Beyond has been a target of meme stock traders. However, serious investors shouldn’t just rely on stock charts and short interest. Ask yourself: Is this a business I can own a piece of with confidence?
Unfortunately, Bed Bath & Beyond doesn’t check all the boxes for cautious investors. The company has avoided total ruin so far, but the signs point to more trouble for Bed Bath & Beyond and its stakeholders in 2023.
| BBBY | Bed Bath & Beyond | $0.32 |
Bankruptcy Is Still a Possibility
While the company hasn’t made a formal Chapter 11 announcement, there’s been chatter about Bed Bath & Beyond possibly going bankrupt. From a financial standpoint, the outlook isn’t great.
Alarmingly, Bed Bath & Beyond’s Form 10-Q (the most recently filed one, though it covers data from late 2022) points to $1.03 billion of long-term debt and $5.2 billion of long-term liabilities.
Bed Bath & Beyond is deeply unprofitable and has a poor quarterly earnings track record. Also, it’s disconcerting that Bed Bath & Beyond admitted it “will likely file for bankruptcy protection” if the company cannot receive the proceeds from a $300 million common stock offering.
Bed Bath & Beyond is proposing a quick fix to prevent a potential delisting. In particular, the company hopes to get the shareholders’ approval to enact a reverse split of BBBY stock.
However, the aforementioned financial issues wouldn’t be solved by a reverse stock split. It’s a tactic that signals desperation, and should set off alarm bells for prospective investors.
The Vendor Consignment Program and BBBY Stock
The difficulties at Bed Bath & Beyond have become so bad that it worries even their suppliers. According to Barron’s, “vendors fearing a potential bankruptcy filing have requested upfront payments and cut credit limits” with Bed Bath & Beyond.
Bed Bath & Beyond “has struggled to keep shelves stocked over the past couple of quarters.” To help remedy this problem, Bed Bath & Beyond started a “vendor consignment program” with ReStore Capital. To boost the retailer’s flagging inventory levels, ReStore Capital plans to buy “up to $120 million” of merchandise from Bed Bath & Beyond’s “key suppliers.”
The press release spins this as a positive development. Yet, Bed Bath & Beyond can’t expect financiers to keep coming to the rescue like this. Besides, consider Bed Bath & Beyond’s reputation. It certainly sounds like vendors are hesitant to conduct business with the company. How many more red flags do BBBY stock investors need before they finally throw in the towel?
Is It Time to Sell BBBY Stock?
Clearly, Bed Bath & Beyond has financial and reputational issues. Granted, the company might not get immediately delisted from the Nasdaq exchange, and may avert bankruptcy for a little while.
However, anyone who’s heavily invested in Bed Bath & Beyond ought to consider lightening up their share positions. Maybe you’ve lost a lot of money with BBBY stock and you’re hoping for a comeback. Don’t count on a miracle happening anytime soon, though. It’s fine to cut your losses and move on to more confidence-inspiring names on the market.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.