Bed Bath & Beyond sees ‘meme-stock’ rise – but too little, too late? | Retail industry

Bed Bath & Beyond, the leading home goods retailer, is headed for bankruptcy. But you wouldn’t necessarily know it by visiting the flagship store in New York’s Chelsea neighborhood or looking at the stock price this week.

Last year, Bed Bath & Beyond was one of the so-called “meme stocks,” including Gamestop, the ailing video game retailer and the AMC movie theater chain, whose stock prices were driven to dizzying heights by a new generation of online traders.

This week, BB&B bubbled up again, with its share price more than doubling during the week amid speculation that it could be a potential takeover target on online stock forums, including Reddit.

The company’s Chelsea store looks better than most, busy with shoppers browsing the aisles, but many items are heavily discounted.

However, some buyers were unsure about the company’s future. “It’s a great store, but other locations have almost no products on the shelves,” said Chintan Patel.

He said he followed Bed Bath & Beyond through its existential crisis. “It was a pump and dump that was started 100 percent by management,” Patel said. Another shopper said the company “kind of screwed itself over.”

Indeed, it seems unlikely that Chelsea shoppers or meme stock traders can save Bed Bath & Beyond right now.

Last week, the company said it could file for Chapter 11 bankruptcy within weeks and said it doubted it could stay in business after a quarter of deep losses and declining sales, which sent its shares down more than 30%. Even this week’s rally — which has pushed shares closer to $5 — puts the stock down 68% for the year.

On Tuesday, the company reported a loss of nearly $400 million. More than 40% of the retailer’s products were out of stock in October, more than double the level in the first half of the year due to supplier departures.

“A third of revenue has disappeared, plunging an already struggling company deeper into chaos,” said Neil Saunders, managing director of GlobalData.

The story of The Bed Bath & Beyond is a strange tale of the power and destruction of the internet. Although Wall Street analysts believe Amazon, Walmart and others will eat up the retailer’s business, the company’s stock has been buoyed by a wave of enthusiasm since billionaire Ryan Cohen, the founder of online pet food company Chewy, bought more than 7 million shares of the company last year.

Online investors who follow the r/wallstreetbets forum on Reddit have crowned Cohen the “meme king who will reign for 1,000 years.”

It’s an open question whether investors really think Bed Bath & Beyond is a solid business or just an opportunity to raise the price and then sell.

Other headline meme stocks, used by online traders to punish hedge funds and other investors who bet against them, also fell. Shares in GameStop are down 70% since January 2022, while shares of AMC are down 82% over the same period.

The party ended last August when Cohen announced plans to sell his 9.8% stake in the company, netting him $178 million and sparking sell-offs and allegations of a pump-and-dump scheme among followers of the meme stock. A month later, Gustavo Arnal, the former CFO of Bed Bath & Beyond, jumped to his death from a luxury skyscraper in Manhattan.

By then, the retailer’s stock had lost more than 70% of its value for the year, and the company said it was looking to turn things around with a strong holiday season.

But efforts to streamline product lines have been hampered by pandemic bottlenecks, a lack of online investment and frustrated consumers who have suddenly returned to in-person shopping only to find that options are lacking.

Unlike many retailers, Bed Bath & Beyond was not typical of the collapse of retail sales under competition from online retailers such as Amazon. At its peak in 2013, BB&B was valued at $17 billion. A company that hadn’t added debt to its balance sheet in two decades borrowed $1.5 billion after buyers moved online.

In August, the company took on more debt after post-pandemic buyers failed to materialize. The retail price this week was close to $550 million.

“Many avenues are being explored and we are determining our next steps in a comprehensive and timely manner,” said chief executive Susan Gove, who launched a turnaround plan four months ago.

But if or when Bed Bath & Beyond seeks bankruptcy protection, many will mourn its demise. The chain was founded in 1971 by Leonard Feinstein and Warren Eisenberg, who opened their first store in Springfield, New Jersey under the name Bed n’ Bath. By 1987, as the vogue for big box stores exploded, Bed n’ Bath expanded out of state, added more products and the “Beyond” label to its name, and became a classic category killer. It went public in 1992, and six years later its sales exceeded $1 billion.

As shoppers perused the aisles Tuesday, many thought the store’s shopping days were numbered. Michael Fekete, who stands at Sixth Avenue, said Bed Bath & Beyond didn’t buy stock growth in 2021 and isn’t buying it now.

“I don’t think the market will allow these mega stores to continue to exist,” he said. “I think they only go online. We’ve seen a lot of other store retailers go that way.”

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