Please ensure Javascript is enabled for purposes of website accessibility

Shares of Bed Bath and Beyond Are Dropping After a Credit Downgrade

By John Rosevear - Mar 30, 2020 at 12:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The struggling company's debt was cut to deep-junk on Friday afternoon.

What happened

Shares of Bed Bath and Beyond (BBBY -19.63%) were moving lower on Monday, after Standard & Poor's cut the company's credit rating to deep-junk levels.

As of noon EDT today, Bed Bath and Beyond's shares were down about 8.6% from Friday's closing price.

So what

In a note released on Friday afternoon, S&P cut Bed Bath and Beyond's credit rating from BB to B+, a two-notch downgrade that puts the company's debt deeply into speculative (or junk) territory.

S&P said that the home-furnishings retailer, which was already struggling with operational challenges, will face further headwinds from restrictions on retail stores as the U.S. and Canada deal with the coronavirus pandemic.

A Bed Bath and Beyond storefront.

Image source: Bed Bath and Beyond.

Specifically, S&P said that if the company's stores have to stay closed for a month or more, it'll be forced to burn a lot of cash, which will likely increase its leverage to tenuous levels by the end of its fiscal year (Feb. 28, 2021). 

As of the end of January, Bed Bath and Beyond had $1.4 billion in cash and another $250 million available in an untapped line of credit. 

The company closed most of its retail stores in the U.S. and Canada on March 23, and said that they will stay closed until at least April 3. It is paying all of its store employees for the time being.

Now what

Concerned investors won't have to wait too long for an update. Bed Bath and Beyond is scheduled to report earnings for the fourth quarter of fiscal 2019 after the market closes on April 15.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
$18.55 (-19.63%) $-4.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.