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Bed Bath & Beyond earnings: ‘This company is going bankrupt,’ analyst says

Loop Capital Managing Director Anthony Chukumba joins Yahoo Finance Live to discuss company earnings for Bed Bath & Beyond, a possible bankruptcy, and the outlook for retail.

Video Transcript

BRIAN SOZZI: Bed bath and boss, retailer Bed Bath & Beyond is out with another dismal earnings report and has ousted its CEO, Mark Tritton. Let's get right into this with Loop Capital Analyst Anthony Chukumba. Anthony, always great to see you. I just want to tell all our viewers you have been very right on this company for many months. So my hat off to you. So my next question is this are we looking at another potential Sears situation here where Bed Bath just may not be around in a couple of years?

ANTHONY CHUKUMBA: Yes and no. Yes, we are looking at a situation in which this company is probably not going to be around, but, no, it's not going to take years. We could be talking about months at this point. We are in the end days. These results were a dumpster fire. There's no other way to put it. So from my perspective, yeah, we're clearly heading down that path. I just don't think it's going to take years.

- OK, and so at this point, this is also a company that Ryan Cohen has placed a bet on, in Bed Bath & Beyond. It sounds like the strategy you don't believe Ryan Cohen is putting forward is going to be something that can actually reverse course for this company.

ANTHONY CHUKUMBA: What strategy? I mean, there is no strategy. I mean, clearly, Ryan Cohen was bored one day. He went on to Wall Street Bets. He saw people talking about Bed Bath & Beyond. He decided to buy a big stake in Bed Bath & Beyond. Everything that Ryan Cohen has said to this point has been nonsensical. He said that the company could easily be taken private. That's not the case. He said that buybuy Baby was worth many multiples of the entire market cap. That's not the case.

There was no strategy. The emperor has no clothes. The notion that this guy is the next Warren Buffett or Carl Icahn is an insult to Warren Buffett or Carl Icahn. He-- he's lost a ton of money and he's going to lose it all, every single penny. This company is going bankrupt.

BRIAN SOZZI: OK, Anthony. So map this out for me. What-- what's the next shoe to drop? Do they make it to the holiday season? Do they have to raise cash before then? Do they sell buybuy Baby? What do the next few months look like?

ANTHONY CHUKUMBA: It's-- it's a little tough to say, but here's the nightmare scenario for Bed Bath & Beyond. Basically, they said, we have about $900 million of liquidity. Most of that is their asset-based revolving credit facility. They can borrow up to core 90% of their inventory. The nightmare scenario is they enter into a death spiral. In other words, their suppliers start to get nervous about these guys going bankrupt, and so they don't give them as good of terms as they did. So in other words, maybe instead of having to pay for the inventory in 60 days, they say 30 days or even cash on delivery.

And so what ends up happening is that asset-based credit facility, it just continues to decline and you're in a death spiral. That's what did in Circuit City. Now, it's hard for me to have a crystal ball and know exactly when the vendors start to get nervous, but you see numbers like this and you better be getting nervous.

JULIE HYMAN: Anthony, it's Julie here. So as you look at this situation with Bed Bath & Beyond, obviously, in your view, it's a victim of bad management on the part of the company, but how much is also the sort of environment writ large here? And how much trouble are we in for for retail? I mean, Bed Bath & Beyond doesn't feel like the only retailer that's struggling here.

ANTHONY CHUKUMBA: Look that's a fair point, but here's the problem with that point, right? 2020 and 2021 were great years for anyone who was selling home goods because suddenly everyone was working from home, leaving cities to buy big houses, basically educating their kids from home. But one you know one retailer that didn't do well, that didn't benefit from those pandemic tailwinds? Bed Bath & Beyond.

So you are correct, the fact that we're now in this much tougher period for retailers, the rising tide lifts and lowers all boats, but let's not-- let's not get it twisted. This company was in a lot of trouble, even when things were good. Now that things are bad, it's game over.

- OK, and so with a whole of what could come in this decline for Bed Bath & Beyond, I mean, the step by step play here even as you started to lay that out, we were talking about Sears a moment ago. Do you see them having to move out of some of that real estate property? Of course, leases, I think that carries what? About $1.6 billion on their balance sheets as of right now.

ANTHONY CHUKUMBA: There's a big lease number. I don't-- I don't remember off the top of my head, but, yes. I mean, they've got just regular debt, and then they've got the leases. And leases, I mean, yeah, that's real debt as well. I mean, that's part of the reason that this has gotten so scary so quickly.

BRIAN SOZZI: Anthony, when you model out this company, how much cash-- I mean, when do you think they run out of cash? I was surprised that they end this quarter with $107 million in cash ahead of key periods like Back to School and the holiday shopping period.

ANTHONY CHUKUMBA: Yeah, look, we're updating our numbers right now. So I'm a little bit hesitant to give an exact projection, but-- but to your point, look, this company burned through $332 million of cash in the first quarter. They burned through almost $1.1 billion in cash in a year. I mean, those are scary numbers. Those are really scary numbers, and it sounds like things haven't really gotten any better in the second quarter. Their comparable sales are running down 20% in the second quarter. So that-- look, these are the type of things that I'm concerned about.

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, OK? Because maybe this rocket is going to the moon, and then it's going to crash on the moon, OK? That's what's going to happen.

- Anthony, while we have you, the other issue here too is for some of the manufacturers that actually work with the retail partner that Bed Bath & Beyond has been for them over the years. Do you see them looking at this as a hit to their overall perception or the sentiment on their brand, as if that's damaged if they stay in a Bed Bath & Beyond right now?

ANTHONY CHUKUMBA: Certainly. I mean, I thought you were kind of going a different way with that question. I mean, look, part of the reason that they're in the position that they're in is because they're just not that integral to their suppliers. Don't get me wrong, if you're an iRobot, for example, who makes who makes Roomba, they're an important partner, but if they were to go away, I mean, you would just divert that volume to Amazon or Walmart or Target or Wayfair or Home Goods. They're just not that integral to the channel.

But you are correct in that at the end of the day, if this company is doing really poorly, that reflects poorly on your brand. And one of the things that I would be concerned about that I heard today is that they're really kind of pulling back on the store remodel program and they have a lot of stores, Bed Bath & Beyond stores that are looking really, really tired. So do you want your high-end products in a store that looks kind of ghetto? I would say, not so much.