BBBY Stock: Can Bed Bath & Beyond Rise From the Ashes In 2023?
20 Fevereiro 2023 - 7:59AM
Finscreener.org
Shares of U.S.-based
retailer Bed Bath & Beyond (NASDAQ:
BBBY) are down 80% in the
last 12 months as Wall Street remains concerned over the
company’s
chances of
survival. Similar
to Costco (NASDAQ:
COST) and Walmart (NYSE: WMT),
Bed Bath & Beyond is a big-box retailer.
BBBY is currently wrestling with
an over-levered balance sheet, weak financials, and poor
fundamentals. In recent years, it has failed to expand its presence
in the digital space, renovate its stores or refresh its product
portfolio.
In a filing with the SEC last
month, Bed Bath & Beyond warned shareholders and its creditors
that it might file for bankruptcy protection as it is running out
of funds to repay its debt.
Is BBBY stock a buy or sell right now?
Bed Bath & Beyond has
struggled to grow its sales since fiscal 2017 (which ended in
February). It was also the last year since the company reported a
net profit. In fiscal 2017, BBBY generated sales of $2.3 billion
and a net income of $425 million.
In fiscal 2022, its sales stood
at $7.9 billion, while net losses were $560 million. Moreover, in
fiscal 2023, Wall Street expects sales to fall by another 30% to
$5.5 billion, with net losses widening to $1.3 billion.
BBBY ended the November quarter
with just $153 million in cash, down 70% compared to the prior-year
period. In this period, its long-term debt grew 64% to $1.94
billion. The debt is primarily in the form of unsecured senior
notes that mature in 2024, 2034, and 2044. The coupon payments are
semi-annually due on the first of February and August each
year.
The company’s interest payments
in February amounted to $28 million. It also owes $550 million
to JP Morgan Chase (NYSE:
JPM), which is an asset-backed loan, and another $375
million to Sixth Street, after it expanded credit facilities in
August 2022.
What next for Bed Bath and Beyond for
investors?
Bed Bath & Beyond filed a
prospectus with the SEC recently and disclosed its intention to
begin a stock offering and raise capital. A report from the Motley
Fool states, “Bed Bath & Beyond will offer preferred stock and
warrants to purchase additional preferred and common stock in
sufficient quantities to raise $225 million in cash
immediately.”
It emphasized, “The company
expects as much as $800 million in additional proceeds that would
result from rights it has to force holders of its warrants to
exercise them.”
In case the offering fails, Bed
Bath and Beyond has claimed it will file for bankruptcy protection
and liquidate its assets.
Another option for Bed Bath &
Beyond is an offer for acquisition or a buyout. Valued at a market
cap of $211 million, the company has close to $4 billion of debt on
its balance sheet. Given its less-than-impressive financials, Bed
Bath & Beyond is unlikely to attract any buyers.
Lastly, BBBY might look to sell
Buy Buy Baby, which is its infant-oriented business segment. This
vertical might be worth around $400 million, injecting the
much-required liquidity into Bed Bath & Beyond.
Even if it raises capital, BBBY
will have to lay off employees, close multiple stores, and lower
its cost base. It will be extremely difficult for Bed Bath &
Beyond to survive until the end of 2023, considering it is
struggling with significant headwinds.
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