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Bed Bath & Beyond’s long-term outlook could be potentially viable, Guggenheim argues

Yahoo Finance Live's Brian Sozzi discusses Guggenheim's long-term outlook for Bed Bath & Beyond amid the company's plans to restructure.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: Also, now looking good. Another stock to look at is Bed Bath & Beyond. A lot is happening with the stock of late with the massive moves to the upside and downside. And to adding on to that, the company out yesterday with a business update, like we talked about in our take. And reading a really good note by the team over at Guggenheim, led by Stephen Forbes and John Heinbockel.

Now they have a neutral rating on Bed Bath & Beyond, I get it. Fair enough. But really going into what it might-- they might need to do to survive. Really breaking down their cash flow usage, what cash might be needed going into the back half of the year. The overall takeaway for them is, they're saying, quote, "Bottom line, we believe we remain in the early phases of Bed Bath's turnaround efforts with significant execution risk, especially given the unpredictable nature of the current macroeconomic environment."

Also, they highlight a debt repayment, sizable one, I should say, just given where this company is, in August 2024 of almost $300 million. They're going to have to get this money from somewhere.

BRAD SMITH: What long term outlook? I mean, what term are we talking about here? And how much of this needs to be accelerated so much that they send a shock wave through the culture of the company, and either for better or for worse. For worse, you got the customers that are noticing a significant shift, or perhaps, that's for better if customers do notice a significant shift in the ability for Bed Bath & Beyond to just drive a better in-store experience.

And then for worse, on the other side of the business, you've got the employees that you also need to be concerned about, how they're also being held throughout this experience, too. And make sure that the-- on the corporate culture side, as you are changing the operations, that the employees also still feel held and still feel their own equity as part of all of this, too, when there are these massive cuts that are going to take place.

BRIAN SOZZI: Absolutely. And we're just showing a graphic just showing the mood regarding Bed Bath & Beyond for the remaining analysts on Wall Street that in fact, cover this company. A lot of them don't want anything to do with Bed Bath & Beyond. They are a tough company to cover, the access isn't that great. And as an analyst, you don't want your name necessarily plastered all over these Reddit boards. It is vile and putrid out there.

So, I understand where all these firms are coming from. But the sentiment is very low. And I go back to what I said in my take, Brad, you know, their strategy appears to be not engaging with this retail community. But maybe, interim CEO of Bed Bath should give Adam Aron, the CEO over AMC, a call. Because again, he has done a lot of things, not what you would expect, but he has won over retail investors.

And that has allowed him to come out here and raise cash, and to get the business what appears to be on the other side of the pandemic. And now, their strategy at Bed Bath could continue to be where they don't engage with media, they don't engage with these retail investors. That may have worked 45 years ago, but not in this hyper connected environment where social media, retail, Reddit, that is driving your stock price.

BRAD SMITH: You know, something we were talking about in the newsroom yesterday is the annexation that all of us had, at one point or another, too a Bed Bath & Beyond. Whether you were getting that 20% discount in the mail, or whether, perhaps, you had a wedding registry at Bed Bath & Beyond a decade ago, maybe two decades ago at this point. And then also, if you remember purchasing back to school items from Bed Bath & Beyond. What's the shift that's taking place, and what are the competitors that have now entered into that category, put storefronts and footprints on all of those different engagement portions.

Whether it's in the wedding-- you've got Target that's entered firmly into that space, to say, all right, we're going to be more annexed to college campuses because we know, if we've got grocery, then we're just going to run a special with whatever the dragon card is, or whatever the, you know, insert college name card here is, to make sure that we've got the returning customers from that college base.

If it's the wedding registries, why not people just doing a wedding registry for Target, and we bring in other third party sellers that are going to let them amp up the type of offerings that we have on there. So all of that considered, the lunch has been getting eaten in front of them, in front of their eyes, because of the positioning of where the stores are, and not shifting that quickly enough to also bring down some of the overhead costs and the sizes of the stores as well, which is just daunting.

BRIAN SOZZI: If I was a kid today, I'm like mommy, mommy, take me to Target. I want a nice new backpack, and I want to Beyond meat burger. Let's leave it there. Bed Bath & Beyond doesn't sell all that crap.