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Troubled retailer Bed Bath & Beyond (NASDAQ:BBBY) appears to be on the verge of death, with a 10-Q signaling bankruptcy and subsequent reports suggesting a lack of interested buyers for its assets.
According to Bloomberg, Bed Bath & Beyond (BBBY) has been unable to find a suitor to avert bankruptcy, putting the possibility of a Chapter 11 filing firmly on the table. Amid bankruptcy concerns, shares have plummeted over 20% in just a few days.
That’s not necessarily bad news for the retail industry as a whole, analysts say. Indeed, a liquidation is expected to help a number of rivals and rivals in terms of staffing shortages and market share.
Wedbush analyst Seth Basham cautioned customers that Wayfair (W) could be a big winner from the Bed Bath & Beyond tragedy.
“For 2023, we forecast a 3% decline in sales for the entire home furnishing industry, but given these factors, slight sales growth; should Bed Bath & Beyond (BBBY) be liquidated, it could add another 3% to W’s revenue growth,” he told clients.
The potential tailwind was a key element of his more optimistic outlook on the stock, which raised his rating to Outperform from Neutral. Basham also increased its price target to $60 from the previous $38.
In addition to the home furnishings category, companies such as Kohl’s Corporation (KSS) and Target (TGT) are also being targeted by analysts as key beneficiaries. According to Oppenheimer, a full liquidation of Bed Bath & Beyond (BBBY) stores “could conservatively add 50-100 basis points to TGT comps and $0.14-0.28 to EPS in the near term.”
In addition to the sales and potential impact on earnings per share, staff shortages have hampered retail and pushed up wages. A liquidation could queue thousands of retail workers for new jobs at Target (TGT), Nordstrom (JWN), Kohl’s (KSS), Macy’s (M), or any of the myriad companies struggling with labor cost headwinds.
Just last week, Walmart (WMT) announced an increase in its national minimum wage to poach workers in understaffed stores. Meanwhile, Amazon faced a bold effort to organize given workers’ current stronger bargaining power.
In short, a sudden influx of workers competing for jobs could serve as another tailwind for the entire retail sector, both in terms of those looking to hire and those struggling with wage inflation.
grains of bath salts
While the commentary on stock donations and staff assistance is compelling, a degree of skepticism about the narrative remains.
The question remains how much market share the retailer can donate given the position they are in. Additionally, the company reported just 32,000 employees in its 2021 annual report. Presumably, this number is currently well below this given the significant restructuring and measures taken to stabilize the company.
In addition, the New York Times recently reported that many retailers are considering or have already approved layoffs to tighten their belts at the moment, rather than welcoming a hiring frenzy. Stitch Fix (SFIX), which cut 20% of its employees, and Saks 5th Avenue, which reduced its headcount by hundreds, were cited as key examples. Amazon’s (AMZN) layoffs targeted the retail sector, in addition to HR and other white-collar positions.
Finally, the liquidation will likely impact retail pricing as well. With liquidation actions potentially forwarded by Bed Bath & Beyond, it would add another headache to an industry already grappling with margin and inventory issues.
Read more about the asset sale difficulties reported by Bed Bath & Beyond.