Bed Bath & Beyond’s biggest problem going forward

Bed Bath & Beyond is a smoldering pile of junk, experts say, and the struggling retailer’s existential future hangs in the balance.

The big question has become: Will Bed Bath & Beyond run out of money?

While the company unveiled drastic steps Wednesday to raise cash ($500 million in debt + a possible sale of 12 million shares), cut costs (closing 150 stores/canning 20% ​​of workforce) and changing its sales trajectory ( promoted new leaders at Bed Bath & Beyond and buybuy BABY banners), Wall Street believes the retailer’s outlook remains extremely uncertain.

The main concern is that Bed Bath & Beyond is performing so poorly — same-store sales fell 26% in the most recent quarter — and the balance sheet is in such dire shape that the company will be forced to raise even more cash in 2023. Where and when (and at what cost) this cash comes from is a big unknown.

A man reads a cookware brochure while shopping inside a Bed Bath & Beyond store in New York April 13, 2011. REUTERS/Lucas Jackson (UNITED STATES)

Here’s the vibe among analysts (via fresh client notes) who continue to provide coverage to the lightning rod retailer with a market cap now of just $715 million.

Guggenheim

  • Analyst: Steven Forbes

  • Assessment: Neutral

  • Price target: No one

Key comment: “A liquidity injection is needed—and a positive one—but at what cost? Given our belief that Bed Bath & Beyond will remain in a negative free cash flow position as management repositions the business, the announced liquidity injection—($375 million FILO facility, ~$125 million of incremental asset-backed loan capacity and the issuance of up to 12 million shares)—is a clear positive. That said, we would expect interest expense to increase (note, this commitment is still subject to customary closing conditions ) and the company has a large debt maturity that expires in August 2024 ($289 million). Bottom line, we believe we remain in the early stages of Bed Bath & Beyond’s turnaround efforts with significant execution risk, especially given the unpredictable nature of the current macro .”

Jeffries

Key comment: “The company historically has not benefited from the strong US consumer, as seen in the multi-year competitive/EBIT deterioration. Mass competitors and emerging digital domestic players are becoming bigger opponents. A change in leadership may be a catalyst in the long term, however Potential short-term volatility. Stay on the sidelines until initiatives have a more meaningful P&L impact.”

Brian Sozzi is editor-in-chief and Anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and up LinkedIn.

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