Here's Why Bed Bath & Beyond Analyst Sticks To Underperform Rating & Cuts Price Target By 33%

Here's Why Bed Bath & Beyond Analyst Sticks To Underperform Rating & Cuts Price Target By 33%
  • Telsey Advisory Group analyst Cristina Fernandez has reiterated an Underperform rating on Bed Bath & Beyond Inc BBBY and lowered the price target from $3.00 to $2.00.
  • The analyst will focus on the traffic/sales trend in recent months and during the holiday season.
  • The analyst's focus will also be on the company's liquidity position and cash burn, the pace of cost cuts, the inventory position, and progress on the merchandising initiatives toward national brands.
  • The analyst does not expect much improvement in the sales trend in 3Q22 vs. the (26%) reported in 2Q22.
  • Also ReadBed Bath & Beyond Seeks Strategic Options, Including Bankruptcy
  • So far in 4Q22, store traffic data from Placer AI shows ongoing YoY declines with traffic at Bed Bath & Beyond (27%) in December, cited the analyst.
  • The recent stock issuance and debt exchange gives Bed Bath & Beyond more time to adjust costs and rebalance its merchandise mix, said Fernandez.
  • However, the analyst remains concerned by the magnitude of the sales and traffic declines and believes it will be challenging to win consumers back in a softer economic climate when the consumer is spending less on home, and in a more competitive and promotional retail landscape.
  • The analyst foresees gross margin contraction of 800 basis points YoY to 27.9% on the lower comparable sales, supply chain costs, and higher markdowns to clear inventory, and SG&A expense deleverage of 800 bps to 45.2%.
  • Price Action: BBBY shares are trading lower by 23.79% at $1.83 on the last check Thursday.
  • Photo Via Wikimedia Commons

Posted In: Analyst ColorNewsPenny StocksPrice TargetReiterationAnalyst RatingsGeneralBriefs