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Why Bed Bath & Beyond Stock Slipped Today

By Jeremy Bowman - Dec 4, 2018 at 4:24PM

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Shares of the home goods retailer sold off on ongoing macro concerns.

What happened

Shares of Bed Bath & Beyond (BBBY 3.83%) were falling today as the struggling retailer sank alongside the broader market on concerns about continuing trade tensions. Though there was no company-specific news out on the home goods seller, Bed Bath & Beyond shares closed down 6.9%, while the S&P 500 lost 3.3%.

So what

A day after stocks surged on signs of a truce between the U.S. and China, the stock market gave up all of yesterday's gains and then some after President Trump took to Twitter to declare himself a "tariff man" as tensions with China resumed. Meanwhile, the yield curve continues to flatten, seen as a leading indicator of a recession, as the yield on three-year treasury bills topped the five-year one. 

A woman shopping for pillows.

Image source: Getty Images.

Both events portend bad news for Bed Bath & Beyond. The home goods retailer has already struggled amid changing shopping habits. The stock has plunged in recent years, and profits have steadily fallen. Following its September earnings report, Bed Bath & Beyond shares plunged as the company cut its sales and earnings forecasts due to the impact of tariffs. Though management said direct imports from China are relatively small, tariffs nonetheless affect broader wholesale prices, as producers that are unaffected by tariffs can charge more for goods.

Similarly, a recession would obviously be problematic for a retailer that's struggling in a strong consumer economic environment.

Now what 

Bed Bath & Beyond's stock is down 44% this year, and days like this one show why. Investors have essentially lost confidence in the company, as it's been unable to evolve with the broader retail industry; its cavernous stores are getting left behind in an era in which shoppers have many more-convenient options. Through the first half of its fiscal year, profits have fallen by nearly 50%. Though the stock is certainly cheap at a P/E of less than 5, it continues to look like a classic value trap.

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