Bed Bath & Beyond stock is heading toward $1: Analyst

Yahoo Finance Live anchors discuss Loop Capital Analyst Anthony Chukumba's rating on Bed Bath & Beyond stock.

Video transcript

BRIAN SOZZI: All right, Bed Bath & Beyond is under fire, actually, a lot of fire after Loop Capital's Anthony Chukumba reiterated his sell rating and $1 price target on the company, I should say, very struggling company. Fascinating note here. Brad, wow, you were over there and now you're back over here. That was a quick run.

So Chukumba looking at and basically what he did is go into a couple of Bed Bath & Beyond stores, what any good retail outlets would do. He's calling out high levels of discounting, also noting, saying that a new asset backed loan, which there has been chatter on the street that, that will be coming soon for Bed Bath. They only ended the quarter with a little over $100 million in cash. That won't do enough to ease the concerns of vendors about getting paid for its inventory, given Bed Bath's struggles.

And you don't even have to go into Bed Bath stores to get a sense of what's going wrong here at Bed Bath. If you just go to their website, top of the page, "up to 80% off warehouse clear out event plus 20% off entire purchase with a coupon". So essentially they're saying, "Here, take our pillows. Take them for free. We need to move them. We need the cash, people."

BRAD SMITH: Can you combine the deals there?

BRIAN SOZZI: That's what the sign says. You're getting maybe 100% off pillows.

BRAD SMITH: You're getting 80% off.

BRIAN SOZZI: Love it.

BRAD SMITH: It's already priced at 80% off, plus an additional 20% off.

BRIAN SOZZI: And let's reaffirm, none of that is normal.

BRAD SMITH: No.

BRIAN SOZZI: None of that. We've been critical of Macy's. That's not happening at Macy's.

But again, tie all this together, you get the sense of a company that is very worried about its survival and it should. I've seen all these stories in retail, notably Sears. Once vendors start to get concerned about getting pay back, they raise the terms or make it harder to get merchandise and that starts a death spiral.

BRAD SMITH: We had seen this enter into some of the retail trading environment earlier this week as well. BBBY why was one of the biggest movers, I believe it was on Wednesday, and we saw that move higher by about 24%, 25%-ish in that ballpark. But it's about sustaining the fundamentals, which Bed Bath & Beyond is just not going to be able to do, at least as of right now. You talk about the store that has amazingly high overhead just to operate the square footage.

They've got inventory in every corner of the store, parts of the store that consumers can't even reach without somebody coming over to assist them. And so that is a deterrent in itself. All of that considered, you've got to ask a few questions. Where do they start to trim not just the number or the amount of square feet that they have in each store, but the amount of stores in totality?

Even as they look across that portfolio to say, and this is kind of getting us into that Sears conversation and what we had seen years back. Where are you getting yourself out of leases? Where you offloading some of the real estate that you do have and how do you have to continue to churn through inventory and even take up more space in some of the warehouses as well? That's an additional cost, by the way, too.

BRIAN SOZZI: Well, I go into Bed Bath wearing my jet pack, Brad. And it helps me get to the very top of the rafters to get those best deals. But you know, speaking of Chukumba, our producer team flagging this. We had Chukumba on a couple weeks ago talking about his call. Here's what he said.

ANTHONY CHUKUMBA: And at the end of the day, you can't meme away debt, right? I mean, to the moon, rocket hands, yeah, not so much. Because maybe this rocket's going to the moon and then it's going to crash on the moon, that's what's going to happen.

BRIAN SOZZI: We need more analysts on Wall Street like Anthony Chukumba right there, willing to, I would say, go out on the line, make a call, and chances are, he may prove very right. Even if Bed Bath does come out here and raise cash, there's real now concern and you could see in their stock price if they survive deep into 2023.

BRAD SMITH: Yeah, well, it's on a roller coaster ride for sure over the past five days here.