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Bed Bath & Beyond Is In Even More Trouble After It Lost $75.4 Million In The Quarter

In the last few months, I’ve written two separate articles telling you to avoid Bed Bath & Beyond stock to protect your portfolio… 

Today, I give an update and answer – Bed Bath & Beyond Is In Even More Trouble After It Lost $75.4 Million In The Quarter? 

You can read the past articles in full using the links above.

But if you don’t want to; here’s a quick recap before we get to today’s update.

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From Article #1 Linked Above

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
  • GNC
  • 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.  

***

From Article #2 Linked Above

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?

No.

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.

***

So far, the thesis to avoid Bed Bath & Beyond stock continued to play out after it released its most up to date quarterly earnings on January 7th 2021… Sort of.

The surface numbers were good…

Comparable store sales revenue grew 5% in the year-to-year quarterly period.

Digital sales grew 94% in the year-to-year quarterly period.

Cash levels are higher and debt levels are lower.

Both gross margins and EBITDA margins grew in the year-to-year quarterly period.

And since I first told you to avoid its stock back in early July its up 146.4%.

This is all fantastic news for the company I said was on its way to extinction.

So, was I wrong about telling you to avoid its stock?

No.

Even with all these improvements its still unprofitable on a net income basis and lost $75.4 million in net income in the quarter… But you don’t see that until page 39 of its 43-page investor presentation.

Almost like they’re trying to hide it…

Other things in the latter pages of the investor presentation show more bad news…

It expects in store traffic to be for the 2020 Holiday Season to be 23% lower this year than it was last year. 

Sales for the full year 2019 were $11.2 billion.  By the end of its 2021 fiscal year BBBY expects sales to be between $8 and $8.2 billion.

This is a fall of 28.6% at the high end in a little over a year.

Its closing another 43 stores by the end of February.  And its store count is down from 1,500 in 2019 to approximately 960 as of the end of its fiscal 2021.

This is a fall of 36% in a little over a year.

The only reason its EBITDA margin showed an increase from last year is after $150 million in adjustments – in their favor – from negative $29.1 million in EBITDA before adjustments to $121.1 million after adjustments.

What does this mean?

That in a real-world sense BBBY is still struggling – even though its online sales are improving rapidly.

The business is still deteriorating… But you must look to the back half of the presentation to see any of this… Because the first half is loaded with all wonderful things.

Most investors don’t look at investor presentations or financial docs in depth, so they don’t see these things.

Which is why its stock is up 146.4% since July.

BBBY is reporting good to great surface level improvements… But when you really dig into the numbers its still deteriorating.

For these reasons ignore the massive speculative increase in its share price since July… Because when you dig into the numbers – they’re still bad.  And still show that BBBY is in big trouble.

Until then, use the following links to some of our recent articles to learn other ways to protect yourself and your investments in these uncertain times.

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


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