Bed Bath & Beyond (NASDAQ:BBBY) stock is in the red again following yesterday’s strategic company update. The struggling retailer will lay off about 20% of its staff and close about 150 “lower-producing” stores out of 955 total locations. Bed Bath also announced that it would offer 12 million shares in an at-the-market (ATM) offering, diluting existing shareholders. The offering represents about 15% of shares currently outstanding.
On the bright side, the company did receive $500 million of new financing, of which $375 million is attributed to a first-in-last-out (FILO) loan from Sixth Street Partners. However, that may be a little too late. Restructuring expert and Macco CEO Drew McManigle explains:
“They should have started this process last year if they’d been paying attention to the post-pandemic numbers. I’m not going to be one bit surprised if the Chapter 11 petitions haven’t already been drafted or are just waiting for signature. I’m also not convinced that this $500 million financing is going to be enough cash.”
BBBY Stock Continues to Fall on Company Update
In the long term, McManigle believes that Bed Bath & Beyond will eventually file for Chapter 11 bankruptcy. He believes that this is the only way for the company to restructure its $1.3 billion of debt.
One source “directly familiar” with the situation told Yahoo! Finance that morale among employees is currently very low. The source added that CEO Sue Gove should have acted earlier but instead waited, making the situation worse.
Meanwhile, Raymond James analyst Bobby Griffin just downgraded BBBY stock to “underperform.” Griffin acknowledges the $500 million of new financing as a positive, but ultimately characterizes it as a move that “kicks the can down the road.” The analyst adds that “ongoing cash burn” may hinder in-store investments, which will not factor well towards increased customer traffic. That said, Griffin is open to changing his view if he sees a “stabilization in sales trends” and “consistent cash flow generation.”
On the other hand, Jefferies analyst Jonathan Matuszewski just raised his price target to $9 from $5 per share. Matuszewski explains that the company now has a plan to lift itself up, including focusing on direct-to-consumer (DTC) brands and refining its loyalty program to attract customers. However, the analyst also specifies key risks, like the absence of a permanent CEO and Bed Bath & Beyond’s recent workforce reductions.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.