Bears Better Beware A Snapback In Bed Bath & Beyond

Make No Doubt, Management Is Incompetent

It's worth pointing out where the bears are absolutely right.. Management has no handle on things at the moment. The company invests in the areas they need and knows their customers. But, they either seem willfully ignorant or downright incompetent in their discussions with investors.

The following exchange boils it down pretty well:

Michael Lasser:

...We saw acceleration in the degradation of your gross margins in the quarter. It will be very helpful to articulate why that was, so we can understand how it's going to get better from here.

Robyn D'Elia:

...Sure. So, the main drivers for gross margin in this quarter were the increase in coupons, a decrease in merchandise margins, and an increase in our net direct-to-customer shipping expense…

The call later discusses how the Beyond+ program works on these margins. However, the entire conversation is riddled with management's inability to answer basic inquiries as to what's going on.

Size Your Position Right, and You'll Be Rewarded

The company's performance of late has been terrible. Management looks as inept as ever. Yet, if you think that Bed Bath & Beyond is about to go bankrupt, you might be on the wrong end of a short squeeze. Short interest in the company grew from 4.5 days to ~10 days currently. Compare that to RH with 2.5 days to cover. Nearly 23% of BBBY shares outstanding are being held short. Any good news even in the company will force a squeeze that could send the stock soaring double digits in days.

Pick your spot and size your position with this stock. It could easily drop another 10%, 20%, or more. Have some faith in capitalism that either management will see the light or be replaced, and all will be righted with the company. A turnaround here could be a five-bagger in a matter of years.

 

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