Summary
BBBY common stock is shorted for obvious reasons.
The company’s tiny, but extensible moat is explained.
It is clarified that BBBY is a financially sound company.
The undervaluation will only be rectified upon changes to management or stabilized/improved margins.
Introduction
The brick-and-mortar carnage, led by Amazon (AMZN), which is selling products at razor-thin margins, sent the shares of Bed Bath & Beyond (BBBY) and other offline retailers onto a downward trajectory. Trading at $80 per share at the end of 2013, we are now looking at a price of less than $20. But make no mistake, it is not only AMZN’s aggressive business model that sent the shares tumbling. Management of BBBY misbehaved in fiscal 2014, funding excessive share repurchases with debt while selling significant amounts of their own stock.
In this article, I will provide topical information about the company, assess its financial stability and profitability while elaborating on what management has done wrong. I strongly believe that this company is a turn-around candidate but I suspect that the situation will only improve upon an activist investor entering the stock or if management finally stabilizes margins.
