Its episodes as a meme stock may have been fun and profitable for a few, but things are getting real for an increasingly shabby-looking Bed Bath & Beyond Inc. (NASDAQ: BBBY). On Thursday, the company said bankruptcy was among its alternatives for digging out of its current troubles.

Shares fell nearly 24% on the news. Already trading in the single digits, Bed Bath & Beyond has been rapidly losing support among institutional investors. According to MarketBeat data, institutions sold $339.89 million in the past 12 months versus institutional purchases of $117.65 million.

Keep in mind: Those are paltry numbers compared to the transactions that mutual funds, banks, hedge funds, insurance companies, university endowments, and other professional managers tally up daily. Bed Bath & Beyond has a market cap of just $146.7 million, well below the liquidity big investors need. 

The company lost money in the past two years, as MarketBeat earnings data show. It was due to report its next quarterly results on January 24 but said on Thursday it had notified the Securities Exchange Commission that it needed more time to close out the quarter’s financial results. 

Wall Street had been expecting a loss of $1.94 per share on revenue of $1.42 billion. That would be a wider loss than a year earlier and a decrease in sales. 

Sales Forecast Below Wall Street Expectations 

However, Thursday’s announcement indicated that results are likely to worsen. The company expects quarterly net sales of $1.259 billion, well below Wall Street views. 

For the next fiscal year, analysts expect a loss of $8.95 per share, wider than the previous loss of $0.96 per share. Adding insult to injury, the company has missed top and bottom-line views in recent quarters.

Shares are down 84% in the past year, reflecting a worsening situation. Unlike other retailers who saw sales slowdowns as a result of pandemic closures, Bed Bath & Beyond enjoyed some good business due to consumers’ interest in sprucing up their homes. However, foot traffic has been on the decline since even before 2020. 

Mark Tritton took over as CEO in 2019 and made the stores more streamlined, but supply-chain chaos didn’t help matters, as consumers couldn’t always find what they wanted. Year-over-year sales declined in seven of the past eight quarters. In October, Sue Gove was named as Tritton’s replacement. 

In Thursday’s statement, Gove said, "Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate micro- and macro-economic challenges.

Reduced credit limits resulted in lower levels of in-stock presentation within the assortments that our customers expect.  Consequently, we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors. We have seen trends improve when in-stock levels have increased."

Holiday-Season Revenue Already Deployed

In other words, holiday-season revenue has already been deployed to stock the shelves rather than being managed with an eye toward earnings. 

According to analyst data compiled by MarketBeat, the consensus rating on Bed Bath & Beyond is “reduce,” something you don’t see very often. The price target, before Thursday’s announcement, was $4.79, representing a potential upside of 161.84%. 

Anyone considering an investment or trade in this stock would be wise to first consider the final paragraph in the announcement Thursday, which read: “The Company continues to consider all strategic alternatives including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the Company's business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code. These measures may not be successful.”

With store closures, layoffs, asset sales, and bankruptcy on the table, it will likely take some time for the stock to be a turnaround play, if those measures work. Given the myriad opportunities in the market among companies that are growing, give it some thought before opting to trade shares of a company that’s clearly on the ropes.