Share Buyback

$BBBY Is Going Beyond Its Buyback Scheme

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Founded in 1971, Bed, Bath & Beyond Inc. (NASDAQ: BBBY) operates retail stores and sells domestic merchandise. Their prime focus is Home, Beauty, Baby, and Wellness products. But over the years, the American company has branched out worldwide.

In 2021, $BBBY was named one of the most shorted stocks, and the consumer company even closed a number of its stores in the USA. But in the late fall season, two key pieces of information were divulged which spiked stock prices for a more hopeful future: buyback and partnership.

What is Buyback?

A share buyback is one of the ways in which a company reinvests in itself. It uses up excess cash to buy back shares from present shareholders or from the market itself, decreasing the number of shares lying around and thus, increasing their worth.

On November 2, 2021, the company announced it had attained more than half of the shares in its three-year Share Buyback program. $600 million worth of shares are now under the company’s belt, and it expects to acquire the remaining $400 million towards 2021 end. What does the company hope to do with these shares? They normally cancel them.

This Buyback was one of two strategies used by the company. The other was the announcement of a partnership with Kroger Co. (NYSE: KR). Around the same time as the repurchase, $BBBY intended to sell its merchandise in the grocery outlets and e-commerce platform owned by Kroger. On the day of these two announcements, the price of $BBBY surged by almost 91%.

A chart showing the comparison of shares repurchased by Bed, Bath & Beyond from 2018 to 2021

According to Buyback reports, the total number of shares the company repurchased in 2020 was 5,153,000 (Worth roughly $98 Million). But in 2021, the repurchase saw a whopping rise: 20,267,000 shares (Worth approx. $523 Million).

Why Go for It?

Despite having a good start for 2021 with a notable insider buy, BBBY reported rather dismal earnings in its Q2 report. As one of the companies that were hit hard by the pandemic, the stock price moved down to its lowest point all year. For most of this year, it was seen as a heavily shorted stock. But following the news of the Buyback program and Kroger partnership, the stock price accelerated back up.

Although, the price has remained generally the same over the course of one year. Buying back shares has helped the stock price fight against disadvantages like lower earnings and others.

When compared to its 2020 net loss, BBBY seemed to be well on the path of recovery. The company reported a net loss of approximately $151K in 2021, which was almost 75% lower than the net loss for 2020. The net loss per share in 2021 has been $1.24, in comparison to $4.94, the net loss/share the previous year.

What is the Future?

We’re not in it for the day by day, we’re in it for the long term,” the company CEO and President, Mark Tritton stated in an interview with CNBC. He remains generally hopeful about the company’s future and is set to improve the company, over criticisms that Bed, Bath & Beyond has received in the past.

At the moment, the company’s franchises are booked for remodeling, and the availability of its products is expanding. This alone could send the company’s, as well as the stock’s future in multiple directions.

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