The clock is ticking on Bed Bath & Beyond (BBBY) . While I think that the company can potentially be in better hands and the interim CEO Mary Winston did a serviceable job considering she's only been at the helm since the end of May, I think that she and the board have their work cut out for them -- and while they have slightly less than $1 billion in cash, I am beginning to wonder if they will need a chunk of that to stay relevant and more importantly to stave off competition.
She knows it.
On the call, she said "We need to give our customer a reason to keep shopping in our brick and mortar stores and in order to do that we must upgrade and enhance our store experience."
Given that former CEO Steve Tamares has been trying to constantly update and enhance their store experience, I have to wonder if anything can work in time to beat off a chain that almost seems to be targeting Bed Bath, and that's Target (TGT) , which has multiple store formats that seem almost to be exactly like Bed Bath but with better selection and cheaper prices.
Bed Bath has 1550 stores and a need to put plenty of money to work -- who knows how much -- to fix things up. Target has 1790 stores and has the money to annihilate many Bed Bath stores. There's almost $12 billion in sales up for grabs and I think Target, which was recommended by Goldman Sachs today, has its sights on taking away the sales of all competitors, including Bed Bath. Looking at the stores these days you know they are also gunning for JC Penney (JCP) . Why not? They still have $12 billion in sales to lose.
How urgent are things?
While every penny is needed, the company still bought back $81 million in stock, or 5.3 million shares. This insane buyback has taken shares down from 224 million six years ago to 127 million now. Six years ago the stock was at $80. Now it is $11.
That has to be the dumbest buyback in history and the fact that it was still going on this quarter is simply unbelievable to me.
Can the company turn things around? Perhaps. The call, though, was not reassuring and with a comparable-store decline of 6.6% in the quarter, I just don't know how this one doesn't become a share donor to Target, just like Sears (SHLD) was for so long to Home Depot (HD) .
I think the new management will end the ridiculous buyback and use every penny to make the stores better. The problem, of course, is Target will spend as much as possible wherever it is adjacent to a Bed Bath and the adjacencies are much too similar for new management to ignore.
It's a tough road. Thank heavens they have some cash. But between the online colossus of Amazon (AMZN) and the brick and mortar mortal enemy of Bed Bath, whoever ends up as CEO here will have his or her hands filled to shrink the company and give it a raison d'etre before it withers away.