Bed Bath & Beyond stock drops after company misses

Peter Sayles |

Bed Bath & Beyond stock drops after company misses

Bed Bath & Beyond (BBBY) has been on our watchlist of short candidates for the past few months.

It continues to disappoint investors time and again. 

Bed Bath & Beyond just missed revenue and profit forecasts for Q2. Same store sales fell 0.6% when retail as a whole has been trending up and customers continue to spend.

It’s seen gross margins decline for 26 consecutive quarters. Shares are down as much as 15% in after hours trading.

We don’t see any value in buying shares at 15% lower. We’re not sure why investors continue to hold if they owned before. And we definitely don’t see any growth path.

Why? You should read our “Stocks That Are Guaranteed To Lose You Money Long Term.” Bed Bath & Beyond is an “Honorable Mention.”

Bed Bath has great products. But it entirely relies on coupons to get its customers through the door.

We receive a minimum two “20% off anything” coupons each week. We’ve had coupons six months past their expiration date get accepted no questions asked.

Bed Bath has pretty much conditioned its customers to never shop there… unless they have a coupon. High value brands almost never offer coupons – Apple phones. Louis Vuitton handbags. Bentley Rolls Royce cars.

Stop providing coupons and you stop getting people into your store.

Investment firm Wedbush agrees. They think, “Bed Bath & Beyond Inc. is having difficulty competing with Inc. on price without coupons and other discounts, hurting its margins.”

Wedbush’s price target is $15. JP Morgan and Wells Fargo have a $14 price target. We think Bed Bath has a lot more room to go lower.

Avoid the stock. Or look for a good entry point to short or buy put options.

Bed Bath’s February 2019 $10 puts cost around $0.15-$0.20. Check those out.