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Why Bed Bath & Beyond Stock Was Skyrocketing Higher on Wednesday

By Danny Vena – Nov 3, 2021 at 12:21PM

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The home products retailer just announced a shift in its business model that includes a key tie-up with a national supermarket chain.

What happened

Shares of Bed Bath & Beyond (BBBY -8.41%) were off to the races Wednesday, surging by as much as 53.6% in early trading. As of 12:16 p.m. EDT, the stock was up by 16.4%.

The struggling home goods retailer announced a further push into e-commerce and a strategic partnership with Kroger (KR -1.22%).

So what

In a press release that dropped after the market close on Tuesday, Bed Bath & Beyond said it was making several "bold moves to redefine its business model." A pivotal part of those plans is a collaboration with Kroger, the country's largest supermarket chain.

Under the collaboration, Bed Bath & Beyond will offer an "extensive selection" of its most popular home and baby products to Kroger customers via Kroger.com, and eventually at a number of its grocery stores. The retailer will begin a small-scale store-within-a-store pilot project sometime next year.

Person looking at a coffee cup while shopping in a home goods store.

Image source: Getty Images.

This is part of an overall strategic reorganization to reinvigorate Bed Bath & Beyond's struggling business. The retailer also plans to expand the assortment of items on its own e-commerce site to include "key products from a highly curated selection of third-party brand partners."

Now what

It wasn't just investor excitement that contributed to Bed Bath & Beyond's share price surge. It has been a battleground stock, with more than 26 million shares sold short (as of Oct. 15), representing nearly 59% of the float. 

When news of the tie-up sent shares soaring, short-sellers scrambled to cover their positions, creating a short squeeze that propelled the stock price even higher.

It's important to remember that Bed Bath & Beyond is in the midst of a multiyear turnaround effort, as its stores have fallen out of favor with some consumers and large swathes of the public are doing more of their shopping via e-commerce. Whether the company will ultimately be successful with this recovery attempt remains to be seen. While it's good to see moves like these from Bed Bath & Beyond, investors should still tread carefully.

Danny Vena 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.

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