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Bed Bath & Beyond sees volatility spike

9 Aug 2022 05:57 PM

Bed Bath & Beyond’s share price jumped yesterday as the meme stock craze returned to fold. The stock closed almost 40% higher last night even though there was no actual news driving the move. Today, the stock is down over 15%. A flurry of activity on online message boards sparked the violent change in price. The company was one of the most searched names on Reddit’s WallStreetBets forum. This sort of behaviour was witnessed in early 2021, where a hoard of retail traders clubbed together to ramp up the certain stocks like GameStop and Bed Bath & Beyond. The monster rally in the Bed Bath & Beyond share price needs to be put into context as the stock fell to a two-year low in July, so it was starting from a low base. The aggressive upward move is largely because of a short squeeze, as an eye watering 46% of Bed Bath & Beyond’s floating shares are shorted. As we saw with GameStop in January 2021, the meme stock fade can bring about colossal volatility.

In June, Bed Bath & Beyond’s share price slumped as the company revealed very disappointing results. The first quarter numbers missed both the top and bottom line expectations. The quarterly loss per share was $2.83, which was far greater than the $1.39 loss that analysts were expecting. Revenue fell by 25% to $1.46 billion, undershooting the $1.51 billion forecast. Same store sales dropped by 24%, while the consensus estimate was for a drop of 20.1%. The quarterly update was accompanied by the announcement that CEO, Mark Tritton, left the group. Mr Tritton joined the company in 2019 have been a long-standing employee of Target. During his time at Bed Bath & Beyond, he closed underperforming outlets, remodelled certain stores, and new brands were launched. Issues surrounding logistics led to stock not being available when it was needed. As consumer demand tapered, the group was lumbered with excess items. Inventory was up roughly 15% on the year, and usually the remedy for rising stockpiles is to slash selling prices. In an effort to tighten its belt and conserve cash, the firm revealed it will cut capital expenditure by $100-$300 million.

The Bed Bath & Beyond share price bottomed out in early July, and it crept higher until the start of August. In the past two sessions the stock has seen a surge. While it holds above the $8.00 area, it is possible the bullish trend will continue. A further rally from here could see it target $20.00. Should the stock fall below the $8.00 region, it might find support at $6.00.

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