Shares of Bed Bath & Beyond (BBBY) are currently tumbling and failing to rise above – or beyond – the risk of bankruptcy, which is currently hanging over the company’s head. Its stock price has fallen 72% this year and since June, when executives fled or got screwed, BBBY’s stock price has fallen more than 50%.
The popular meme stock has been plagued by the flight of directors from the board and a senior executive who took his own life.
On November 2, it was announced that BBBY board chief customer officer Rafeh Masood was the latest to jump ship and leave the beleaguered retailer. Massod was also chief technology officer and his resignation is effective Dec. 2, according to a regulatory filing.
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Bed Bath & Beyond (BBBY) Stock Price Chart
BBBY’s management is in turmoil
Masood isn’t the only one to leave the company down. In June, BBBY’s board kicked out general manager Mark Tritton and merchandising manager Joe Hartsig.
The company’s chief accountant also left and the group eliminated the chief executive this summer.
In September, the tragic news broke that the group’s former chief financial officer, Gustavo Arnal, jumped to his death from a luxury skyscraper in midtown Manhattan after allegations of fraud against him.
Investors may wonder, what next for BBBY shares? Is the company, famous for its home décor products, finally coming to the end of its reign as one of America’s leading merchandising suppliers?
Well, maybe.
Experts fear bankruptcy is on the cards.
With discretionary consumer spending falling due to rising inflation and interest rate hikes, retail stocks like BBBY are already going through a tough time. But add management issues and poor business management to that and you have an even bigger disaster on your hands, which could lead to further complications later.
In July, credit benchmark agency Moodys (MCO) downgraded the debt rating from BBBY to the lowest possible rating. Moodys downgraded the company’s debt from CFR to Caa2. Which means Moodys thinks there’s a strong possibility that BBBY will default on its debt over the next 12 months.
“The downward revisions reflect the impact of Bed Bath’s sharp decline in revenue and EBITDA on its liquidity, free cash flow and credit metrics. The challenges Bed Bath faces in restoring profitability are also considered. Inventory levels are not only high and misaligned with sales trends, but are overweight private label products that need to be phased out and replaced with national brands in the face of weaker consumer demand,” a statement from Moodys (MCO).
“In addition, the downward revisions reflect governance considerations, including the company’s early departure of its CEO and Chief Merchandising Officer, the completion of its $1 billion accelerated share buyback program with $40 million in share buybacks in the first quarter of 2022 despite the company’s weak operational performance and the ineffectiveness of its turnaround strategy to address continued pressures on Bed Bath’s operations and credit metrics.
Then Moodys (MCO) hit BBBY with another jab last month and downgraded him again from Caa2 to Ca.
“The downgrades reflect governance considerations, including the company’s announcement that it may pursue liability transactions [1] which Moody’s would likely view as a struggling exchange to settle its $284 million of senior unsecured notes due August 2024 in light of continued pressures on Bed Bath’s operations and credit metrics,” said Christina Boni. , Senior Vice President at Moody’s Investors Service.
BBBY’s current debt stands at $3.53bn (£3.14bn) and the company hopes that under new CEO Sue Grove, who took over from ousted leader Tritton in June, things will change. But the company is still plagued by supply chain issues and inventory issues.
BBBY faces bankruptcy
So, is BBBY heading for bankruptcy?
Well, Moodys thinks so.
“The rating of Bed Bath’s Ca family of companies reflects the very high probability of default over the next twelve months. It also reflects governance considerations, including the appointment of interim senior management and the hiring of consultants to support Bed Bath in its operational turnaround efforts, which include inventory, cash management and balance sheet optimization. “said Moodys. (AGC) statement said.
“Despite its stature as the largest dedicated retailer of home goods and home furnishings with a national footprint, the business faces considerable default risk. Bed Bath faces $284 million notes maturing in 2024 and announced that it was exploring a possible distressed exchange that would be seen by Moodys (AGC) as a fault event.
Moody’s (AGC) estimates that despite the sharp contraction in business, the company completed its accelerated $1 billion share buyback program, which included the repurchase of $40 million of common stock in the first quarter of fiscal 2022. The company’s weak demand trends continued, which weighed heavily on its profitability.
Even though Bed Bath and Beyond (BBBY) recently took steps to improve liquidity, the company still needs to stabilize operating losses and improve working capital as it navigates a turnaround in an uncertain consumer environment.
Moody’s (MCO) stock price chart
Maybe college student Jake Freeman can help save BBBY?
The data showed that BBBY has been one of the most searched stocks on Zacks.com lately.
Analysts believe that if BBBY can bring customers back to its stores, a turnaround will occur.
“They have to bring the customer back into the store,” McShane said at Goldman Sachs’ 29th annual retail conference. in October.
Jason Haas, analyst at Morgan Stanley, believes that BBBY needs a radical change in cash consumption.
BBBY has another option.
That might take the advice of a college student, called Jake Freeman, who won $110 million in the Bed Bath & Beyond (BBBY) rally this year. In July, Freeman wrote a scathing letter to BBBY saying, “BBBY is facing an existential crisis for her survival. To ensure its survival, BBBY must reduce its cash burn rate, significantly improve its capital structure and raise funds.
Which route BBBY decides to take, only time will tell. But for now, it looks like the group needs to act quickly if it wants to avoid bankruptcy.
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