Bed Bath & Beyond Is America's Worst Retailer

Bed Bath & Beyond Inc. (NASDAQ: BBBY) staged a sucker rally. Investors carelessly drove shares up almost 35% to $1.78 as the ruined company approached a Chapter 11 filing. Perhaps a few investors can make money on the backs of the ignorant. Those who cannot will face substantial losses.

The stock’s increase reminds Wall Street of other stocks that took huge leaps and then plunged because their financial fundamentals were poor. AMC Entertainment and GameStop are the best examples. Neither has a future that argues for a sharply improved share price. (See the 25 classic American brands now owned by foreign companies.)

According to several reports from large and well-regarded media, Bed Bath & Beyond is on its way to bankruptcy. That should come as no shock. The retailer did not have enough money to buy sufficient holiday inventory. Strong sales at the end of last year were its only hope.

Standard and Poor’s slightly upgraded its opinion of Best Bath & Beyond’s future in a note that said a ruinous end was “a virtual certainty based on its deteriorating liquidity position, challenging operating conditions, and the looming maturities.” That spells out that common shareholders will get nothing as creditors pull out whatever value is left. That does not include cash, which is virtually gone.

The retailer is about to report numbers for its most recent quarter. They may be worse than those posted in the last one. Revenue fell 28% to $1.5 billion, and the company lost $366 million.

Soon, Bed Bath & Beyond employees will know if they have kept their jobs. When it closed 150 stores last year, 20% of its workers lost their jobs. There are just over 700 stores left. Almost certainly, many of those will be closed and thousands of people will be without jobs.

The common stock of Bed Bath & Beyond already should be marked down to zero. Some investors believe they can make money as it falls apart. Some of them will get burned.

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