1 More Reason To Avoid Bed Bath & Beyond
Three months ago I told you to Stay Away From Bed Bath & Beyond stock.
Today I tell you 1 More Reason To Avoid Bed Bath & Beyond… Even after it produced great quarterly earnings. You can read the original article in full at the link above.
But if you don’t want to; here’s a quick recap of why I said you should avoid investing in Bed Bath & Beyond.
Stay Away From Bed Bath & Beyond (BBBY)
At least 200 store closures over the next two years.
A 49% fall in sales due to store closures because of the coronavirus.
Falling gross margins.
A loss of $2.44 per share.
These are the lowlights of Bed Bath & Beyond’s latest earnings that came out on July 8th, 2020.
The earnings report was brutal for the retailer that’s been flailing for years now.
This latest news sent shares down 8% on that day and another 25% the next day to $7.77 per share as of this writing.
Bed Bath & Beyond used to be one of the best run retail companies in the world. At its height at the beginning of 2013 it had a market cap of $17 billion. Today its only $980 million.
This is a total loss of 94.2% in 7 years.
This rapid fall is due to more people shopping online as the 2010’s progressed. And then also in recent years when people were able to buy something and then get it delivered to their house.
All without leaving your home, dealing with traffic, dealing with rude employees, dealing with other rude customers, and all the other negatives that come with shopping in stores.
In time its stock is likely to go to $0 if it’s not bought out or taken private before its inevitable bankruptcy.
This trend has been building for years and is known as the “Retail Apocalypse.”
The Retail Apocalypse is former great retailers like Sears, JC Penney, Macy’s, Bed Bath & Beyond and others losing out to people shopping online and collapsing.
It’s impossible to give you exact stats on the following due to the slow decline of individual companies in the retail industry.
But millions of jobs have been lost to this trend already. And thousands if not tens of thousands of stores have closed nationwide.
And it’s only going to continue with the rise of people shopping and then getting things delivered directly to their houses.
This has been going on for years… But retail store closures due to the coronavirus is accelerating this.
Since the start of the coronavirus pandemic in March the following retailers declared bankruptcy.
- JC Penney
- Brooks Brothers
- Lucky Brands
- J. Crew
- Neiman Marcus
And according to reports many other retailers are preparing to file for bankruptcy.
A few like Bed Bath & Beyond are hanging on as best they can by laying off employees and closing stores to conserve on costs.
But it won’t work.
Normally in these articles I show you profitability metrics, valuations, and more.
But frankly none of those matter in this case.
Bed Bath & Beyond’s continued decline into bankruptcy is inevitable.
Stay away from owning its stock.
This thesis to continue avoiding Bed Bath & Beyond continued to play out after it released its most up to date quarterly earnings on October 1st. Sort of.
- Overall sales dropped 1%.
- Digital sales exploded 89% higher.
- Earnings per share rose 57% in the 2nd quarter 2020 compared to the 2nd quarter of 2019 to $0.50 per share.
- And Bed Bath & Beyond announced a partnership with Target subsidiary Shipt to ship orders to customers after they buy something from Bed Bath & Beyond online.
This all led to Bed Bath & Beyond shares skyrocketing.
As of this writing its shares are up 168% from a market cap of $980 million when I told you to avoid its stock three months ago to $2.63 billion today.
So, was I wrong about you avoiding Bed Bath & Beyond stock?
At least not yet.
The Retail Apocalypse was the largest reason I told you to avoid its stock.
And one quarter of data and an announcement with a shipping company doesn’t remove it from the risk of the Retail Apocalypse overnight.
Bed Bath & Beyond needs to sustain this over the next few quarters after these promising baby steps.
But if they pull off this transition from retail to online, I’ll be wrong.
At this point that’s still a gigantic if though.
I’ll keep you updated on this as things progress in the coming months. But for now, continue avoiding Bed Bath & Beyond stock even after its shares skyrocketed.
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Disclosure – Jason Rivera is a 13+ year veteran value investor who now spends much of his time helping other investors earn higher than average investment returns safely. He does not have any holdings in any securities mentioned above and the article expresses his own opinions. He has no business relationship with any company mentioned above.