Shareholders and analysts are identifying store footprint and technology capabilities as key areas Bed Bath & Beyond Inc. (BBBY) must address to turn itself around.
Right now, shareholders are feeling the pain of a 22% drop at 3:24 p.m. in New York in share price has wiped out almost a quarter of the company's value. The drop to a low of $14.16 per share is the lowest level the stock has seen since March 2000, according to FactSet.
Still, some see potential for a turnaround.
"A turnaround is always possible, but it will definitely take some time," Greylin Investment Management Inc. CEO David Parkinson told Real Money. "Over the next 18-24 months there could be a turnaround. The stock is cheap enough that the returns could be great, but of course that is far from assured."
His firm currently manages $498.6 million on behalf of his clients and holds 185,855 shares of Bed Bath & Beyond as of its latest 13-F filing.
Still, uncertainty and lowered guidance is preventing Parkinson from adding to that position for the time being.
"I think there is an opportunity to add to positions because it is cheap, but I'd rather let the dust settle," he said. "I think I'll just take some tax losses."
Laying out what it would take for a turnaround to come to fruition, Parkinson looked at store footprint and technology.
"They need to evaluate their footprint and continue to work on online business," he explained. "They need to find the right number of stores to have."
He said he expects the company to close some stores in order to focus on its blue-chip properties.
Parkinson's perception was echoed by Jefferies Financial (JEF) analyst Jonathan Matuszewski, who wrote about the issue of store footprint in a note Thursday morning.
"[The company's] valuation appears to reflect too many stores with muted top-line prospects," he wrote. "Next-gen stores are trending [positively] but represent a fraction of the overall footprint."
Matuszewski said the company needs to focus on execution in accelerating its plan to open 40 more next-gen stores early next year. He explained that this will be a key step to profitability.
Jefferies maintained their hold rating for the stock with a price target of $16.
Past Time for Technology
Parkinson said the company must also work urgently towards optimizing up its e-commerce business.
"[Buybacks] have been a horrendous story up to now," he said. "They really miscalculated how big the change in retail was going to be."
Luckily, the company has begun to turn its focus to online retail which the company noted as an area of growth.
"We continue to see strong growth in our customer-facing digital channels," CFO Robyn D'Elia told analysts during the company's earnings call on Wednesday.
She noted that increasing investment in online product offering is a strategic initiative for the company.
Parkinson explained that he feels this will take time and growing pains.
"Right now there is little confidence in the ability of the company to turn things around," he explained. "They need to under-promise and over-deliver in the near term. They've been burned too many quarters in a row."
If the company can in fact over-deliver, Parkinson's upside case could be a compelling one for opportunistic buyers.