Raymond James downgrades Bed Bath & Beyond, says turnaround plan ‘only kicks the can down the road’

Bed Bath & Beyond ‘s latest attempt to resolve its struggling business only pushes its problems further down the road, according to Raymond James. Analyst Bobby Griffin downgraded shares of the battered retailer to underperform from market perform, saying in a note to clients Thursday that the ongoing cash burn at the company makes it difficult to maintain a neutral perspective going forward. “Yes, the new financing will improve the company’s liquidity position (~$1B of available liquidity post new debt offering vs. prior liquidity of $500M), but likely only ‘kicks the can down the road’ as underlying business trends remain abysmal, with comparable sales down ~26% y/y (no signs of improvement) and a sizable quarterly cash burn ($325M in FCF burn in F2Q),” he said. The downgrade from Raymond James comes after the company announced its latest strategic plan Wednesday to turn around its business and cut costs by trimming 20% of its workforce, closing stores and securing more than $500 million in fresh financing. While Bed Bath & Beyond also said it will bring back more branded products, Griffin sees flaws in the company’s ability to improve its performance as consumer spending and housing slow. At the same time, the company’s ongoing cash burn could prevent necessary remodeling and shopping changes geared toward improving customer traffic, Griffin said. “Accordingly, we feel an Underperform rating is better suited versus our prior Market Perform,” he wrote. “We would look to change our view if we see signs of consistent cash flow generation again and a stabilization in sales trends.” Shares of Bed Bath & Beyond have tumbled about 33% this year but ended August up more than 89% higher. The retail stock fell more than 4% in the premarket after sliding 21% on Wednesday. — CNBC’s Michael Bloom contributed reporting

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