UPDATE: Raymond James Downgrades Bed Bath & Beyond (BBBY) to Underperform

(Updated - September 1, 2022 6:18 AM EDT)

Raymond James analyst Bobby Griffin downgraded Bed Bath & Beyond (NASDAQ: BBBY) from Market Perform to Underperform.

The analyst comments "We are downgrading BBBY to an Underperform rating, from a Market Perform, following Bed Bath and Beyond’s strategic update. While haven’t recommended purchases of BBBY in a long time (downgraded to a Market Perform in Jan of 2021), we find it challenging to even maintain our neutral rating given the current trends of the business and ongoing cash burn. Yes, the new financing will improve the company’s liquidity position (~$1B of available liquidity post new debt offering vs. prior liquidity of $500M), but likely only “kicks the can down the road” as underlying business trends remain abysmal, with comparable sales down ~26% y/y (no signs of improvement) and a sizable quarterly cash burn ($325M in FCF burn in F2Q). Even with a move back towards more branded products, we struggle to see a pathway for improved performance, especially with discretionary consumer spending and housing slowing. Furthermore, the ongoing cash burn (even if improved some in F3Q/F4Q) and need to preserve cash/liquidity will limit in-store investments (remodels), likely only further hindering customer traffic. Recall, one of our biggest concerns with Bed Bath & Beyond was the company’s in-store shopping experience versus home furnishing peers. Accordingly, we feel an Underperform rating is better suited versus our prior Market Perform. We would look to change our view if we see signs of consistent cash flow generation again and a stabilization in sales trends."

For an analyst ratings summary and ratings history on Bed Bath & Beyond click here. For more ratings news on Bed Bath & Beyond click here.

Shares of Bed Bath & Beyond closed at $9.53 yesterday.

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