Bed Bath & Beyond Inc. (NASDAQ: BBBY) is one of the leading US retailers specializing in home goods. The company is one of the most successful companies in the United States, but BBBY is trying to cope with financial difficulties as it faces increasing competition from online retailers who can offer similar products at much lower prices. I noticed At the same time, attempts by BBBY’s previous administrations to expand its business backfired, leaving the company heavily indebted. Bankruptcy may be imminent if BBBY’s restructuring plans do not yield the desired results as the company is struggling financially. For these reasons, I consider his forecasts for BBBY stock to be bearish and will sell the stock as the risks associated with the stock far outweigh the potential rewards.
overview
BBBY surprised investors last summer after a short squeeze on reddit led to a massive jump from $5 to $31. The rise was short-lived, however, as BBBY shares gave up all of its gains after an activist investor and his GME chairman, Ryan Cohen, sold all of his stake in the company. Now that this story is over, BBBY stock is trading near the $2 range, and he realizes there’s an ambiguous future awaiting the company. Increased competition and a failing business model could cause the company to go bankrupt in 2023, so BBBY’s stock forecast can’t get any worse.
turnaround plan
Since the pandemic hit its supply chain, BBBY’s stock has been on a downtrend as the pandemic has thrown the company into financial turmoil. This downward trajectory could have been noticed before the pandemic when BBBY decided to replace national brands with private-label merchandise under its previous management.However, this strategy alienated his BBBY shoppers and The company ended up losing a significant portion of its market share. As such, BBBY has seen accelerating losses and growing debt. Despite these red flags, BBBY’s former management continued to push for costly share buybacks, increasing pressure on failed retailers and leading to his current spiral collapse into PPS. rice field.
Now with a new management team in place under the leadership of Sue Gove, BBBY is proceeding with a turnaround plan. Through this plan, BBBY is working to address its debt situation by adopting a back-to-basics strategy intended to foster the growth of the company’s business. One of the main pillars of this strategy is BBBY’s return to being a national brand rather than a private label. Because of this, BBBY decided to discontinue his three own labels (Haven, Wild Sage and Studio 3B) and cut his investment in the remaining six labels by 20%. At the same time, BBBY is working to increase the inventory of domestic brands to 20% of his.
While this plan could theoretically help BBBY’s business recover, this strategy will fail as customers have already lost interest in BBBY’s products following a strategy that failed under the previous regime. I think so. The reason for this belief is that after losing a core customer base, as was the case with bankrupt giants Sears and JCPenney, it is usually difficult for retailers to attract a core customer base again.
Additionally, reverting to a national brand could prove costly to the company’s future prospects as the company seeks to raise cash to continue operations. , BBBY’s vendors are already concerned about the company’s financial situation and are demanding assurances from the company to make payments on time after earlier delays in payments. You can ask us to prepay you to reduce the risk that the company will not pay for your shipping.
decrease in sales
Given the declining interest in BBBY’s products, the company’s bet on a successful holiday season was wrecked as the company had to offer products at deep discounts to raise cash. seems to have been broken However, this attempt also seems to have failed, as BBBY’s traffic to his website dropped by 19% in November. Additionally, from Thanksgiving to Cyber Monday, he saw a 25% drop in traffic. This should be a profitable period for retailers. BBBY expects further sales declines in its upcoming third quarter results, due out on January 10, as the company should have shown better results given the steep discounts to clear unsold inventory. doing. The business may prove a failure as the situation is irreparable in my opinion.
Meanwhile, the current macroeconomic environment of rising interest rates and falling home markets will also have a further negative impact on BBBY. As a result, BBBY’s only hope for 2023 is a strong registration year. But wedding registrations have moved to Walmart, Target, and Amazon, where they offer lower prices and sometimes better products. But I suspect these efforts are delaying the inevitable bankruptcy for BBBY.
shear dilution
With the company’s very weak liquidity position, BBBY has had to dilute its shareholders to raise capital, and after initially raising $75 million in late August through the sale of 12 million shares, ATM’s Increased offering by $150 million. Currently, BBBY’s OS is from 80.3 million to 116.6 million at the end of August. Despite this dilution, the company has sold about 22 million shares, so its ATM program has not been very successful. The ATM program appears to have had minimal impact on the company’s finances, given the significant drop in stock prices. Given this, I think BBBY stock is on track for further declines to new lows, barring a major catalyst. Until then, I think his forecast for BBBY stock in 2023 remains bearish.
debt exchange offer
Turning to the company’s debt situation, BBBY launched a debt exchange proposal last October to address this dire situation and deal with the maturity of the 2024 bonds. Through this offer, BBBY intends to exchange Senior Notes for:
- 3.693% Senior Second Lien Convertible Notes due 2027 or 3.749% Senior Notes due 2024 in the case of 8.821% Senior Second Lien Convertible Notes due 2027.
- The 4.915% Senior Note due 2034 is a new 12% Senior Third Lien Collateralized Convertible Note due 2029.
- The 5.165% Senior Notes have a maturity of 2044 and are convertible bonds with a new third lien.
If this proposal succeeds, BBBY will be able to meet its debt obligations at a later date so it can focus on implementing its recovery plan. However, bondholders appear hesitant to accept the company’s offer because the terms are unattractive to most bondholders. As a result, BBBY is constantly extending the deadline for exchange offers, with the latest extension set to expire on his January 4th. In that regard, we expect BBBY to extend the deadline further as current returns are not overwhelming.
As of December 19, BBBY’s exchange offer had auctioned $51.9 million from the 2034 bonds, $67.7 million from the 2044 bonds, plus $39.2 million from the 2024 bonds. However, these bids were only 18.2%, 24.7%, and 11.1%, respectively, of the principal amount of each bill. Based on this, it is unlikely that BBBY’s exchange offer will succeed unless BBBY improves the terms of the exchange and makes these bonds more attractive to investors.
BBBY Stock Forecast
BBBY finds itself at risk of bankruptcy if management’s turnaround plans do not come to fruition due to declining sales, declining store foot traffic, declining cash levels and obsolete inventory. In that regard, given the failure of the company’s debt exchange offer, I believe the company’s plans may not succeed. I’m here. If the offer is extended further as expected, BBBY will have to improve the terms of the exchange, which will put pressure on the company’s balance sheet when these notes arrive. Mature.
Another thing to keep an eye on is BBBY’s third quarter earnings scheduled for January 10th. It provides insight into the company’s future. With this in mind, we expect BBBY to report underwhelming earnings after a disappointing holiday season. I think BBBY’s stock forecast is bearish as the company may go bankrupt in 2019.
The views and opinions expressed herein are those of the author and do not necessarily reflect the official policy or position of Penny Stocks Today. Content provided by contributors is their opinion and should not be construed as financial advice.
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