Bed Bath & Beyond (NASDAQ:BBBY) stock seems headed for the rocks. The home goods retailer has scrapped plans to find a buyer or lender as a bankruptcy filing to protect the assets approaches.
Shares opened near $4 on Jan. 19 but may only be held up by a reported short squeeze.
Investors from outside retail may marvel at the speed of this disaster, given that the company had sales of nearly $8 billion in fiscal 2022. It comes down to the word “trust.”
Suppliers rely on trust before they deliver goods to a store. In most cases, they wait 90 days for their money. Even a rumor of bankruptcy may halt deliveries.
For BBBY, bankruptcy may be more than a rumor. The November quarter was a disaster. The Christmas quarter looks worse. The company’s bonds aren’t selling even at a 90% discount. Its revolving credit line appears to be drying up.
Reports of a coming recession have also dried up interest from possible acquirers.
Buy Buy Baby, the company’s baby goods chain, was thought to be valuable last year. Now the only bidder seems to be Sycamore Partners, which specializes in bankruptcy.
Interest in the main brand seems to be coming from Authentic Brands, which works with mall owner Simon Property Group (NYSE:SPG) to keep failing retailers alive for the rental income. Bed Bath & Beyond, however, is mostly in the out-parcels of malls. This means Authentic’s interest would be in the brand itself.
BBBY Stock: What Happens Next?
Asked recently to profile retailers that might go under this year, I avoided writing about Bed Bath & Beyond, believing its bankruptcy inevitable. The other name I rejected, Party City (NYSE:PRTY), has already made a Chapter 11 filing.
I suspect 11 may be the next chapter in the BBBY story. It’s the only way to stop the drain of assets, and if that doesn’t work, liquidation under Chapter 7 of the code would be next.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
