Shares of Bed Bath & Beyond Inc. tumbled to a third straight loss on Thursday after Raymond James analyst Bobby Griffin turned bearish after the homewares retailer’s strategy update, citing “appalling” underlying business trends.
And while Griffin said the new $500 million funding announced by Bed Bath will improve the company’s liquidity position, it’s likely to just “kick the box down the road.”
The BBBY butt,
which was swept away by the “meme stocks” phenomenon, fell 6.8% in morning trading. After plunging 21.3% on Wednesday, the stock is down 33.5% in a three-day losing streak.
Griffin lowered his rating to underperform, having been in market performance since January 2021. That makes Griffin the 13th of 18 analysts surveyed by FactSet who have the equivalent of a sell rating on the stock. . There is one analyst who is bullish, while the other four are neutral.
Basham’s downgrade comes after the company updated investors with its plan to boost liquidity and sales, including announcing new funding and plans for a stock offering, as well as plans to increase its national brand inventory while exiting some owned brands, and to keep its buy buy BABY business.
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“While we haven’t recommended BBBY buys in a long time…we find it difficult even to maintain our neutral rating given current business trends and ongoing cash burn,” Griffin wrote in a statement. note to customers. “Yes, the new funding will improve the company’s liquidity position… but will likely only ‘launch the box down the road’ as underlying business trends remain dire, with comparable sales down 26% [year-over-year] (no sign of improvement) and significant cash burn ($325 million in [free cash flow] burn in FQ2).
He expressed concern that ongoing cash burn will limit what the company can invest in its stores, hampering its plans to improve the customer experience.
Additionally, he struggles to see a path to improved performance, even with the company returning to focus on more branded products, due to the recent slowdown in consumer discretionary spending and a slowing market. housing.
Wedbush’s Seth Basham reiterated his underperforming rating on Bed Bath shares, saying that while the new funding and equity offering plan lowers short-term liquidity risk and gives the company more time to manage bloated inventory, he still expects several “noisier” quarters. and sees “tremendous” challenges in regaining ground with lost customers.
“Even with more leeway to achieve its vision now that the liquidity outlook is improving, new leadership needs to perfectly execute a strategy that may still not resonate while navigating significant balance sheet challenges, in our view. “, wrote Basham.
After registering the second-best month in Bed Bath & Beyond’s 30-year public history in August, the stock was still down 39.1% year-to-date, while the exchange-traded fund SPDR Consumer Discretionary Select Sector XLY,
fell 24.5% and the S&P 500 SPX index,