What happened

Bed Bath & Beyond (BBBY) stock started off this week on a volatile note, first falling by more than 5% by 10:30 a.m. ET Monday, and then recovering most of that. It was down by just 0.3% as of 2:35 p.m. ET. The S&P 500 was up by about 1% at that time. It's been a difficult year for the struggling retailer -- its shares are down more than 70% so far in 2022.

Monday's drop wasn't sparked by any specific news from the company, but instead reflected a souring mood on Wall Street about Bed Bath & Beyond's turnaround prospects.

So what

The retailer's last earnings report showed that it was dealing with more than its share of bad news. Sales dove by 26% in its fiscal second quarter (which ended in late August) due to a combination of supply chain issues and plunging store traffic. Bed Bath & Beyond also had to cut prices to try to keep inventory levels from surging, leading to a much weaker gross profit margin. Its net loss for the quarter was $366 million, and even on an adjusted basis, it lost $256 million.

Investors have had some periods of rising enthusiasm for the stock despite those issues. Optimism about a possibly stronger holiday shopping season helped, for example, and so did expectations that Bed Bath & Beyond might sell its faster-growing buybuy Baby brand. Yet that hoped-for spin-off didn't pan out as rising interest rates made financing for such deals harder to secure. Instead, Bed Bath & Beyond is heading into the critical holiday shopping season with weak traffic and inventory trends.

Now what

Investors might see upward spikes from this meme stock at times. But a sustained increase in its value would require fundamental improvements in the company's operating and financial trajectories. It's likely to face added pressure on both of those fronts in the holiday season, though.

As such, investors should look to more successful retail sector stocks to buy and hold for the long term. Yes, many industry players will likely experience weaker growth this year than they did during previous phases of the pandemic. But Bed Bath & Beyond's market share losses and financial stresses make it especially risky to hold right now.