Bed Bath & Beyond Is Junk

Shares of Bed Bath & Beyond Inc. (NASDAQ: BBBY), the barely surviving retailer, jumped 70% Tuesday. GameStop Chair Ryan Cohen’s RC Ventures bought out-of-the-money call options. As board chair of GameStop Corp. (NYSE: GME), his judgment can hardly hold much value, as that specialty retailer is another deeply troubled company.

The rise in Bed Bath & Beyond’s shares stands as another example of traders without any sense piling into a stock. Many will lose most of their investment. No one appears to understand that a few people make money as the stock value skyrockets. Many more take a beating on the way down.

Bed Bath & Beyond fired its CEO-savior, Mark Tritton, and replaced him with board member Sue Grove. The company is in such bad shape it will not find a highly qualified executive to take the job full time. Bed Bath & Beyond is on life support and will not come off it.

In the most recently reported quarter, Bed Bath & Beyond’s comparable store sales dropped 23% year over year. Revenue declined 25% to $1.5 billion. The net loss was $358 million. The $107 million on the balance sheet raises the question of whether Bed Bath & Beyond can survive financially for more than a few months.

The Wall Street Journal pointed out that “The sharp rise in shares came despite a number of analysts’ warnings about dwindling liquidity at the retailer, which is fighting to maintain the confidence of suppliers and investors after a push into private-label brands that didn’t resonate with consumers.”

The movement in Bed Bath & Beyond fits the old description of a sucker rally. Smart investors take advantage of novices or those with poor judgment. Bed Bath & Beyond’s shares have no realistic support for their current price. Many investors are about to get burned.

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