![]() The firm also noted that pressure could mount on Bed Bath & Beyond to sell Buybuy Baby. Other possible financing options for the company could include using its Buybuy Baby brand as collateral by turning it into an unrestricted subsidiary or taking a “first in, last out” loan, according to Wedbush’s note. “Such a large-scale promotion might mean another inventory reserve markdown is in the works, and with suppliers hesitant to refill BBBY’s warehouses, this could limit the company’s capacity to fully tap the $800m remaining on its ABL that is partly predicated on the market value of BBBY’s inventory balance,” Basham wrote. ![]() The company is currently running an aggressive sale campaign on mostly brand-owned products. Still, Basham expects that cash burn will remain high over the next two quarters until inventory becomes a source of cash. “If the company does not secure adequate financing to appease its vendor base, it might have not appropriate inventory for the key holiday period, leading to a fast downward spiral and creating bankruptcy risk,” Seth Basham wrote in the Monday note. Last week, Bed Bath & Beyond started working with bankruptcy law firm Kirkland & Ellis, and some vendors have stopped shipments due to lack of payments, according to Bloomberg. The firm has an underperform rating and a $5 price target on the retailer, suggesting about 50% downside from where shares currently trade. Bed Bath & Beyond is unwinding its recent meme-fueled rally but is still overvalued and facing multiple upcoming challenges, according to Wedbush.
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