Bed, Bath, Beyond and Oops

Before you think I know more about stocks than you do, consider this.

BBBY stock
Source: Shutterstock

I’m the guy who recommended you buy Bed, Bath and Beyond (NYSE:BBBY) in January.

Not only that, I’m the idiot who took his own advice and did it, after giving you four days to digest my stupidity.

I just checked. BBBY stock is down 75%.

There’s a lesson here. Everybody makes mistakes. I also own Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN), but like most people, I like a diversified portfolio. My retirement account is down about 15% from its high.

You must keep pitching, keep hoping, and learn.

What I Saw in BBBY Stock

What I saw in Bed, Bath & Beyond was a company ready for a turnaround.

Mark Tritton had just come in from Target (NYSE:TGT), where he was chief merchandising officer. There he had discovered fire, as my boss from 1995 put it, when he suddenly found himself covering the Internet with a T-1 line.

The fire in this case was a new concept of store brands. The idea was they should be better than national brands, not just pale imitations. On taking charge, Tritton blew out his C-suite and promised a new team. He generated $250 million through the sale and leaseback of his stores. That looked like a war chest he could build with.

In a pinch, I figured, Tritton could cancel the BBBY stock dividend. I was looking for capital gains. I was hungry for them. I was greedy.

I was stupid.

What Happened

No one predicted the speed with which COVID-19 overtook the world. I’ll admit I didn’t.

Neither did Tritton. He remains behind the curve. He finally announced the shutdown of half his stores for two weeks, on March 20. They were due to open April 3.

They won’t. In fact, the rest of the stores followed them.

Even if Bed Bath & Beyond had a competitive web presence, and it doesn’t, the product mix is worthless for the current moment. All they can do is slap 20% off stickers on the best merchandise.

The result is that S&P has cut the company’s bond ratings to the deep junk level of B+. It still had $1.4 billion in cash and an untapped line of credit worth $250 million at the end of January. But how long can it last?

The reality of just how bad things are has hit the stock hard. It’s down 21% in the last five trading sessions. It was due to open down another nickel on April 1.

Any Hope for BBBY Stock?

There may be some hope. Tritton let 500 people go early in March as part of his restructuring, cutting yearly expenses by $85 million. He brought in Joe Hartsig from Walgreens Boots Alliance (NYSE:WBA) as chief merchandising officer, a job he had previously handled himself.

Because of the restructuring and thanks to the sale of its real estate, the cash burn at BBBY is not as bad as it could be. Closing the stores cuts the burn further. But until the pandemic eases off and people go back to work, BBBY is virtually out of business.

The Bottom Line

No one is making money right now. It’s all about capital preservation. Speculation must give way to staying afloat.

That’s true for Bed, Bath & Beyond as well. Tritton should drop his online prices to the floor and clear out inventory for whatever he can get, hunker down for a few months, and set new plans.

If he can stay alive, Tritton might have the cash to reboot. That’s a small hope, but if you’re still in this dog of a stock it’s what you have.

Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in BBBY, MSFT and AMZN.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/bed-bath-beyond-and-oops/.

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