Bed Bath & Beyond’s big dilemma: Can it survive?

Shares in Bed Bath & Beyond, a company that was plunged into the volatile world of meme-stock trading this year, fell approximately 41% Friday, days after its share price had more than doubled.

The immediate catalyst for the Friday sell-off appeared to be the same as the one that caused the brief run-up earlier in the week and well before it: activist investor Ryan Cohen.

Cohen, the co-founder of online pet retailer Chewy, has been at the vanguard of the meme-stock movement, having helped lead a recovery in the price of video game retailer GameStop after disclosing his purchase of a stake in that company in 2020 on the belief that it was undervalued.

In March, Cohen revealed his purchase of a 9.8% stake in Bed Bath & Beyond. Online retail investors took the announcement as a hint that the home goods retailer was Cohen’s next turnaround candidate. Cohen went on to pressure the company to force out then-CEO Mark Tritton and appointed three hand-picked board members.

On Monday, a Securities and Exchange Commission filing revealed Cohen had, in April, placed bets that Bed Bath & Beyond’s shares would continue to increase.

But by Thursday, another filing showed Cohen planned to sell his shares entirely. According to CNBC calculationsCohen made as much as $59 million between the time he began investing in Bed Bath & Beyond and this week.

Cohen could not be reached for comment before publication.

Since February 2015, Bed Bath & Beyond’s stock price has been in a nearly continual decline, tumbling from $77 a share to Friday’s price of about $11. By 2019, an analyst for the Motley Fool investment advice website Summed up the company’s problems:

“Its prices aren’t especially low, most of its merchandise isn’t unique, and it faces a lot of competition,” the analyst wrote.

While the revelation of Cohen’s stake in March briefly sent shares to as high as $27 this year, by July, they had fallen back to below $5.

And today, according to one Wall Street analyst, the physical decline in the company’s stores is evidence that the company’s longstanding issues remain.

In a note to investors dated Aug. 3, Anthony Chukumba, managing director at Loop Capital, said he had made visits to several Bed Bath & Beyond outlets in the northern Chicago suburbs.

The upshot: The housewares chain continues to suffer. Chukumba said his visits showed there were nearly empty shelves and displays throughout the stores, and that the company had begun to heavily discount much of its recently introduced private label merchandise, something he said demonstrated a lack of consumer traction.

He said he also saw plenty of clearance items.

That wasn’t all.

“We found the Bed Bath & Beyond stores — all of which were located in high-end strip malls in some of the highest income towns in Illinois, if not the country — to be in poor condition, including carpets desperately in need of vacuuming, dirty wooden floors, and messy displays by the front registers,” he wrote.

“In addition, the store associates were highly disengaged, with just a single one approaching and offering to help us in all the stores we visited,” Chukumba said. “We believe the poor store conditions are likely the result of reduced labor hours, while the apathetic store associates signal low employee morale.”

In a statement Wednesday reported by CNBC, Bed Bath & Beyond said it had already reached a “constructive agreement” with Cohen’s RC Ventures in Marchand that it was exploring potential changes to its financial structure.

A separate report Thursday from Bloomberg showed Bed Bath & Beyond had hired law firm Kirkland and Ellis to help the company manage its debt.

But in an earlier note to investors, Chukumba said those debt issues are unlikely to be resolved without a bankruptcy filing.

“Bed Bath & Beyond’s fundamental performance and financial health continue to steadily deteriorate, and we are becoming increasing concerned a Chapter 11 bankruptcy filing is forthcoming,” he wrote July 5.