Nvidia, Alibaba, PCE Inflation Data, and Bed Bath & Beyond Earnings in Focus

Next week's Catalyst Watch highlights Nvidia, Alibaba, PCE inflation read, and the return of Bed Bath & Beyond. Key events to watch include Nvidia's Q1 earnings and outlook, Alibaba's Q1 earnings, and the PCE inflation read, which could impact stock prices. Additionally, Bed Bath & Beyond's return to the market after being delisted from the NYSE may also have an impact on stock prices.

Next week's Catalyst Watch highlights a mix of significant events, including Nvidia's Q1 earnings and outlook, Alibaba's Q1 earnings, and the PCE inflation read. Additionally, Bed Bath & Beyond's return to the market after being delisted from the NYSE may also have an impact on stock prices. This article will focus on the potential implications of Bed Bath & Beyond's reemergence.

Bed Bath & Beyond (BBBY) has undergone a significant transformation since its bankruptcy filing in the spring of 2023. Beyond (BYON), the parent company, acquired the brand out of bankruptcy and has since been attempting to revive it. The company's rally from its 52-week lows partially reflects a broader return of market euphoria, which has likely pushed the company's management to revive BBBY [1].

BYON's strategy involves converting Kirkland’s stores, renamed The Brand House Collective (TBHC), into Bed Bath & Beyond Home outlets. The first location opened in Nashville in July, with plans to convert another 75 Kirkland's stores by the end of 2026. This expansion is expected to increase capital expenditures, although the scope will be dampened by the focus on conversions of a store format amenable to Bed Bath & Beyond Home.

Despite these efforts, BYON's underlying financials continue to show year-over-year weakness. Revenue for the second quarter came in at $282.25 million, down 29.1% over its year-ago comp. The company's net loss during the quarter was $19.31 million, a material improvement from a loss of $42.58 million a year ago. However, the company's liquidity remains a concern, with existing liquidity as of the end of the second quarter of $147.53 million at a more than 3-year low [1].

The bullish argument for BYON is that a concentrated effort to bring Bed Bath & Beyond Home outlets to the U.S. retail landscape could drive a sustained increase in revenue and an upturn in the company's fortunes. However, the uncertainty for bulls is how much the ramp-up in conversions of Kirkland's will stall the progress on free cash burn. The company has been aggressively dependent on equity offerings to plug prior cash shortfalls, with existing liquidity as of the end of the second quarter of $147.53 million at a more than 3-year low [1].

Critically, the sell rating on BYON is based on the capital expenditure needs the conversions will require and the fact that the liquidity base for the company to roll this out was already under a sustained dip. The company expanded an existing credit facility it provided to Kirkland's by $5.2 million back in May. BYON also acquired the rights to the Kirkland’s brand, and as part of this strategic partnership, the newly acquired brand will have to open and operate Bed Bath & Beyond Home and eventually buybuy BABY stores [1].

In conclusion, BYON's move to revive BBBY represents an uncertain strategy against the losses suffered by the two underlying companies before their respective acquisition by BYON. While the company is being rated as a sell, investors should remain cautious and watch the developments closely.

References:
[1] https://seekingalpha.com/article/4815937-beyond-bed-bath-and-beyond-attempts-to-revive-its-apes-as-liquidity-collapses