Bed Bath & Beyond Inc. (BBBY) owns and runs a retail store network. The firm distributes a variety of household goods, home furnishings, and other juvenile products. The company operates 953 locations and sells its items through various websites and applications.

BBBY stock soared about 22% on news that numerous company officials bought up tens of thousands of shares. Investors viewed this as a vote of confidence that the ailing store could be spared from bankruptcy. Sue Gove, the interim CEO, acquired 50,000 shares for around $230,000. According to filings, two more board members, Harriet Edelman and Jeff Kirwan, each purchased 10,000 shares for less than $5 a share.

However, the stock has declined 82.7% over the past year and 65.2% year-to-date to close yesterday’s trading session at $5.08. In addition, its shares are currently trading 83.3% below its 52-week high of $30.35, which it hit on July 22, 2021.

Investors have been bearish about BBBY’s prospects owing to its poor financials and diminishing growth. The company’s fiscal 2022 first-quarter performance was impacted by persistent macroeconomic headwinds, a shift in customer preferences, soaring inflation, supply-chain interruptions, and sales and inventory upheaval.

Here’s what could shape BBBY’s performance in the near term:

Inadequate Financials

BBBY’s revenue decreased 25.1% year-over-year to $1.46 billion for the first quarter ended May 28, 2022. Its operating loss grew 371.9% from the year-ago value to $339.16 million.

The company’s net loss surged 603% from the prior-year quarter to $357.67 million. In addition, its net cash used in operating activities came in at $383.55 million, representing a year-over-year increase of 1234.5%.

Negative Profit Margins

BBBY’s trailing-12-month gross profit margin of 31% is 15.4% lower than the industry average of 36.7%. Also, its trailing-12-month ROA, ROC, and net income margin are negative 17.5%, 6.7%, and 11.7%, respectively. Moreover, its trailing-12-month negative EBITDA margin of 1.22% compares to its industry average of 12.1%.

Consensus Rating and Price Target Indicate Potential Downside

Of the 12 Wall Street analysts that rated BBBY, eight rated it Sell, and four rated it Hold. The 12-month median price target of $4.16 indicates an 18.2% potential downside. The price targets range from a low of $1.00 to a high of $14.00.

POWR Ratings Reflect Bleak Outlook

BBBY has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. BBBY has an F for Stability and Sentiment. The stock beta of 2 is consistent with the Stability grade. In addition, consensus rating and price targets are in sync with the Sentiment grade.

Of the 63 stocks in the C-rated Home Improvements & Goods industry, BBBY is ranked #61.

Beyond what I’ve stated above, you can view BBBY ratings for Value, Growth, Momentum, and Quality here.

Bottom Line

The company’s widening losses and poor consensus price estimates are concerning. Analysts expect its EPS to decline by 4025% in the current quarter ending August 2022 and 465.7% in the current fiscal year.

In addition, the stock is currently trading below its 50-day and 200-day moving averages of $7.99 and $15.22, indicating a downtrend. So, we think the stock is best avoided now.

How Does Bed Bath & Beyond Inc. (BBBY) Stack Up Against its Peers?

While BBBY has an overall D rating, one might want to consider its industry peers, Acuity Brands Inc. (AYI) and Bassett Furniture Industries Incorporated (BSET), which have an overall A (Strong Buy) rating.

BBBY shares fell $0.09 (-1.77%) in premarket trading Thursday. Year-to-date, BBBY has declined -65.16%, versus a -19.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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