This retailer stands to benefit from Bed Bath & Beyond bankruptcy

on Jan 27, 2023
  • Bed Bath & Beyond says it doesn't have sufficient funds to repay its debt.
  • Oppenheimer analyst says Target will benefit from the demise of BBBY.
  • His price objective of $190 on Target stock suggests a 13% upside.

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Bed Bath & Beyond Inc (NASDAQ: BBBY), on Friday, confirmed that it doesn’t have sufficient funds to repay its debt. Shares are still slightly in the green this morning.

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BBBY is considering bankruptcy

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JPMorgan has already presented the embattled chain of domestic merchandise retail stores with a notice of default. Consequently, Bed Bath & Beyond said in a regulatory filing today:

This will lead the Company to consider all strategic alternatives, including restructuring its debt under the U.S. Bankruptcy Code.

Earlier this month, BBBY said it lost $385.8 million in its third financial quarter – more than double the $158 million that analysts had expected (read more).

Also on Friday, an Oppenheimer analyst said the retailer’s demise would be a benefit for Target Corporation (NYSE: TGT). His $190 price objective on the department store suggests about a 13% upside from here.

Target to relish a boost to its EPS

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Once Bed Bath & Beyond fully liquidates, Parikh says in his research note, Target will see a meaningful increase of 14 cents to 28 cents in its per-share earnings.

We think Target Corporation could have even better access to more brands over time to the extent a significant Bed Bath & Beyond retrenchment comes to fruition.

His conservative call is for a 50 bps to 100 bps boost to its comps in the near term. Parikh is bullish also because Target is committed to expanding its digital footprint and has a bunch of partnerships with other brands.

Target stock that pays a dividend yield of 2.55% is currently down over 30% versus its high in April 2022. In its current financial quarter, the retailer is expected to earn $1.4 a share – down significantly from $3.19 per share a year ago.

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