The home-goods retailer has grappled with a lack of supply for popular categories, which drove shoppers to competitors such as Target (TGT) and Walmart (WMT), according to the report. Traffic at Bed Bath & Beyond is down 20% to 30% annually, while Target and Walmart trends have held steady, the brokerage said, citing data from Placer.ai.
"We have seen demand for home items continue to wane as consumers shift their spending to 'return to normal' categories and wallets are pressured by inflation," B. Riley analyst Susan Anderson said, speaking of industry wide trends.
That has led to Target and Walmart becoming over-inventoried in the home category, triggering a series of promotions that will likely impact Bed Bath & Beyond's sales and margins this year, Anderson said. The company will have to be "overly promotional to compete," she added.
B. Riley downgraded Bed Bath & Beyond's investment rating to neutral from buy while slashing its price target to $7 from $17. The firm now anticipates the company reporting a loss in fiscal 2023. The stock, which has lost more than half of its market value so far this year through Friday, was trading 4% lower Monday. The retailer in April swung to an adjusted loss in the fiscal fourth quarter ended Feb. 26 as sales plunged 22% to $2.05 billion.
The company will be lapping strong seasons in the fiscal second and third quarters, creating further pressure in the near term, Anderson said. Meanwhile, a potential sale of the buybuy BABY division will likely face complications as valuations have declined and market volatility has increased, according to the report.
Earlier in the year, Bed Bath & Beyond struck a deal with GameStop (GME) chairman Ryan Cohen to appoint three new board members, with two of them set to join a committee focused on exploring options for the buybuy BABY unit.
Price: 6.59, Change: -0.41, Percent Change: -5.86
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