Why Is Bed Bath & Beyond (BBBY) Stock Falling Today?

  • Bed Bath & Beyond (BBBY) stock has sunk more than 7% on disappointing holiday sales reports.
  • Inventory levels remain low, forcing shoppers to look elsewhere for home goods.
  • Now, investors appear to be growing concerned about a potential death spiral forming in BBBY stock.
BBBY stock - Why Is Bed Bath & Beyond (BBBY) Stock Falling Today?

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Following the Thanksgiving weekend, it appears investors aren’t in the buying mood, with the majority of stocks seeing red today. That said, many investors are paying close attention to popular retailer Bed Bath & Beyond (NASDAQ:BBBY), which is getting hit harder than most. At the time of writing, BBBY stock is down more than 7% on an abysmal day.

This move follows reports that inventory levels are lower than where they should be heading into the holiday season. A Wall Street Journal report highlighted a number of data points investors are taking to heart today.

In short, the data doesn’t look good for Bed Bath & Beyond. Recent data for October suggests approximately 40% of the company’s inventory was out of stock. For gift-givers out there, that’s certainly not enticing, particularly as we are in the hottest shopping period of the year.

Additionally, the company is among the notable decliners following rather poor Black Friday and Cyber Monday sales relative to its peers.

Let’s dive into what this all means for investors interested in this beaten-up stock.

Is Now the Time to Go Shopping for BBBY Stock?

Bed Bath & Beyond has been a troubled retailer for some time. Accordingly, with a short interest that has remained sky-high, meme traders have jumped on this stock, causing various surges in the past. Thus, for many retail investors, this is a momentum stock that’s on the watch list.

That said, there’s a reason this stock is so heavily shorted. The company’s operating cash flows continue to remain depressed. This fact, combined with previous necessary capital raises tied to the pandemic, leaves investors with a company with a balance sheet that’s below investment grade for many.

The concern among many investors is a so-called death spiral could take hold of BBBY stock. If the company’s suppliers don’t believe they’ll have the cash flow to pay their bills, they may hold off on shipping orders. That could lead to situations like this where empty shelves force shoppers to look elsewhere, exacerbating the company’s financial issues.

The hope for many bulls was Bed Bath & Beyond would be able to weather this near-term storm and make it through the holidays. Right now, it’s unclear whether that will be the case. Thus, this is a stock I continue to believe is highly speculative, even at these beaten-down levels.

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On the date of publication, Chris MacDonald did not have (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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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