WSM - Bed Bath & Beyond stock slumps over 30% after bankruptcy filing

2023-04-24 16:02:08 ET

Bed Bath & Beyond ( NASDAQ: BBBY ) stock plunged on Monday after the beleaguered retailer filed for bankruptcy protection over the weekend.

While the company said that its 480 combined stores under the Bed Bath & Beyond and Buy Buy Baby brands will remain open for the time being, there is a plan in place to liquidate inventory and shutter all locations. The chain is also seeking financing amid the bankruptcy to keep up with expenses, including keeping paychecks on schedule for about 14,000 employees that remain on staff.

CEO Sue Gove and the company’s lawyers stressed in statements and bankruptcy proceedings, respectively, that the company is still pursuing a sale “for some or all of the remaining stores” as well. However, analysts threw cold water on the possibility.

“We are hard-pressed to envision a buyer stepping up to save the chain,” Oppenheimer’s analysts commented. “The company has struggled significantly for some time. News of bankruptcy and forthcoming, likely liquidation should not come as a surprise to investors.”

That said, Oppenheimer’s team noted that the rapid closure of Bed Bath & Beyond stores should serve to boost sales for competitors in home furnishings like Williams-Sonoma ( WSM ), Lovesac ( LOVE ), and Wayfair ( W ). Amazon ( AMZN ), Target ( TGT ), Walmart ( WMT ), and Overstock ( OSTK ) were also cited by sell-side analysts as potential beneficiaries .

Short sellers are also beneficiaries of the stock’s protracted plunge in recent months. According to S3 Partners managing director of predictive analytics Ihor Dusaniwsky, Bed Bath & Beyond short sellers raked in $6.6M in mark-to-market profits on Monday, bringing the total for the month of April to $15.8M and year-to-date, mark-to-market profits to $144.6M.

“Shorting BBBY has been a long-term profitable trade with shorts up $1.26B in mark-to-market profits since its high of $52.89 on January 27, 2021 and up $763M in mark-to-market profits since its more recent high of $23.08 on August 17, 2022,” Dusaniwsky wrote.

The more recent high for the stock also coincided with activist investor Ryan Cohen’s exit from his position .

Of course, a bankruptcy filing is not necessarily the end of the story for the meme stock favorite. For example, Revlon shares tripled despite a Chapter 11 filing in late 2022 while Hertz and GNC also marked wild swings in mid-2020 .

“We should expect some short-term support to BBBY’s stock price as more short sellers trim or close their positions in an effort to realize their mark-to-market profits,” Dusaniwsky noted. “Short traders will be providing liquidity to long shareholders as buy-to-covers provide a more tradable market and partially offset long-selling pressure.”

Shares of Bed Bath & Beyond ( BBBY ) closed Monday’s trading down about 35% , touching a new low of just $0.18.

Read more on the details of the bankruptcy filing .

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