Bed Bath & Beyond (NASDAQ:BBBY) stock rose after it made interest payments that were due Feb. 1 on Feb. 28. The news sent BBBY stock up 6% on March 1 and another 1% overnight. The shares were trading early on March 2 at $1.54 with a market capitalization of $178 million.
Payments end the imminent threat of bankruptcy but do little to change the company’s trajectory. Shares fell 50% in February.
Stand and Deliver
Bed Bath & Beyond continues to shutter stores around the country as it tries to find a route back to profit. InvestorPlace has been chronicling the company’s travails since before it dumped former CEO Mark Tritton last year and put director Sue Gove in as interim CEO.
Tritton tried to reinvent the company, previously a name-brand discounter, as a curated collection of store brands like RH (NYSE:RH), formerly known as Restoration Hardware, which was founded in 2011 and is now worth almost $7 billion. The Covid-19 pandemic and supply chain snarls ruined any chances of that. But along the way small traders, attracted by professionals selling it short, made BBBY a meme stock, sending it as high as $50 per share in early 2021.
Traders who sold the hype made money. Those who stayed in had repeated opportunities to get out, each time at a lower price, as the shares spiked on short squeezes. The most recent squeeze last August briefly took the shares above $23.
But in the real world, operating losses were destroying the balance sheet. Over the last four reported quarters BBBY has lost about $1.3 billion on constantly declining revenue.
Gove’s latest move, a $1 billion cash injection, waters down current shareholders and puts new preferred stock buyers ahead of them in bankruptcy. It could keep the company alive for another year. But consumers tend to avoid retailers that are known to be failing, as Kohl’s (NYSE:KSS) shareholders will tell you.
What Happens Next for BBBY Stock
Bed Bath & Beyond may seem to be trading near its break-up value. It had $1.44 billion in inventory and $153.52 million in cash in November. But Gove’s plan puts all that into the hands of new investors. Those who stayed hoping for a turnaround will be disappointed even if it comes.
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On the date of publication, Dana Blankenhorn 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.