What happened

Shares of Bed Bath & Beyond (BBBY) were taking a dive last month as a meme-stock-driven short squeeze faded, an investor update at the end of August was poorly received, and the company reported disappointing second-quarter results at the end of September.

As a result, the stock finished September down 36%, according to data from S&P Global Market Intelligence. As you can see from the chart below, the stock was headed downward most of the month.

BBBY Chart

BBBY data by YCharts

So what

Coming into September, Bed Bath & Beyond had just posted an investor update on Aug. 31 that included disappointing preliminary second-quarter results, new financing of more than $500 million, and a cost-cutting plan made up of layoffs and store closures.

Consequently, the company opened September with a number of analyst downgrades, pushing the stock down 8.6%. Raymond James downgraded the stock to a sell, saying the underlying business trends were "abysmal," and that there's little path to a turnaround. Bank of America also cut its price target to $2 due to the ongoing cash burn, and S&P Global Ratings lowered its credit rating on the company from CCC to CCC-.  

A few days later the retail stock was rocked by the death of CFO Gustavo Arnal, and the stock fell another 18.4% on the day that news came out. From there, the stock rebounded, trending with a short-lived recovery in the S&P 500. However, it reversed course as soon as the broad market did as fears of rising interest rates weighed on stocks at the end of the month, following the Federal Open Market Committee decision on Sept. 21 to raise the federa; funds rate by 75 basis points.

Finally, at the end of the month, the company issued its full second-quarter earnings report, missing estimates on both the top and bottom lines. Comparable sales fell 26% and revenue declined 28% to $1.44 billion, below the consensus of $1.47 billion. On the bottom line, it reported an adjusted per-share loss of $3.22, well below the consensus of $1.85. It also lost $320.5 million in free cash flow.

Now what

Though the company expects its cash burn rate to improve in the second half of the year, the chances of a recovery still seem slim. The business is unsustainable based on its current cash burn; its management team is in disarray following the ouster of its CEO in June; macro headwinds seem to be strengthening; and the home goods sector was already struggling, losing steam after sales boomed during the pandemic.

The stock seems likely to move lower from here.