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Struggling retailer Bed Bath & Beyond (NASDAQ:BBBY) appears to be on the verge of death, with a 10-Q indicating insolvency and subsequent reports indicating a lack of interested buyers for its assets.
According to Bloombergbed bath and beyond (BBBY) has been unable to find a suitor to help stave off bankruptcy, putting the possibility of a Chapter 11 filing firmly on the table. Amid insolvency concerns, shares have plunged more than 20% in question of days.
However, that’s not necessarily bad news for the retail industry as a whole, according to analysts. In fact, a sale is expected to help several peers and competitors in terms of staff shortages and market share.
share donor
Wedbush analyst Seth Basham has warned clients that Wayfair (W) could be a big winner from Bed Bath & Beyond’s misfortune.
“We forecast total home furnishings industry sales to decline 3% in 2023, but W sales will slightly increase due to these factors; in the event of a Bed Bath & Beyond (BBBY) liquidation, that could drive another 3% to W run rate revenue growth,” he told clients.
The potential tailwind was a key piece of his more bullish outlook on the stock, raising his rating from Neutral to Outperform. Basham also raised his price target to $60 from the previous $38.
Beyond the home furnishings category, analysts also point to companies like Kohl’s Corporation (KSS) and Target (TGT) as key beneficiaries. According to Oppenheimer, a full sell-off of Bed Bath & Beyond (BBBY) stores “could conservatively add 50-100bp to TGT offsets and $0.14-0.28 to EPS in the near term.”
help Wanted
In addition to the sales and potential impact of EPS, staff shortages have hampered the retail sector and pushed up wages. A layoff could put thousands of retail employees in line for new positions at Target (TGT), Nordstrom (JWN), Kohl’s (KSS), Macy’s (M) or any of the countless other companies that have battled labor costs.
Just last week, Walmart (WMT) announced an increase to its national minimum wage in an effort to attract workers from short-staffed stores. Meanwhile, Amazon has faced emboldened pressure to unionize given the stronger bargaining position of workers at the moment.
In short, a sudden influx of workers competing for jobs could serve as another tailwind for the retail sector as a whole, both in terms of those looking to hire and those fighting wage inflation.
Bath Salt Beads
While the comments about donating stock and helping staff are compelling, there remains a modicum of skepticism in the narrative.
That is, questions remain about how much market share the retailer has left to donate given the position it is in. Furthermore, the company reported just 32K employees in its 2021 annual filing. Presumably, in the midst of a major restructuring and moves to stabilize the company, that number is much lower today.
More, The New York Times reported recently that many retailers are considering or have already authorized layoffs to tighten their belts rather than welcome a hiring spree. Stitch Fix (SFIX), which cut 20% of its salaried workers, and Saks 5th Avenue, which cut headcount by hundreds, were cited as key examples. The Amazon (AMZN) layoffs also affected, along with human resources and other white-collar roles, its retail operations.
Finally, the selloff is likely to affect prices in the retail industry as well. With clearance promotions potentially being sent out by Bed Bath & Beyond, an industry already dealing with margin and inventory issues would have another headache.
Learn more about asset sales issues reported by Bed Bath & Beyond.
