On a recent episode of The Rank, our very own chief growth officer, Anand Chokkavelu, and Fool.com contributor Matt Frankel, CFP, ranked 10 of the most popular meme stocks. And both were surprised at this consumer goods stock, which tied for the No. 1 position. Hear what it is and why in this Fool Live video clip, recorded on June 25.
Anand Chokkavelu: Tied for No. 1, this is very shocking, Bed Bath & Beyond (NASDAQ:BBBY), BBBY. I can’t believe that it’s tied for No. 1. Bed Bath & Beyond was a struggling retailer long before the pandemic. Its five-year average sales growth was negative 1% heading into the pandemic. Then it lost a further 17% of its sales during the pandemic. This fiscal year it expects sales to fall another 11-13%. Management is spinning a classic turnaround story. The question is whether we believe them. Let’s step back. Operationally, it’s focused on closing less profitable stores, helps explain sales losses, and divesting non-core concepts like Cost Plus World Market. It’s focused on launching private labels. Owned brands like Target has been so successful at names that they are launching include Nestwell, Haven, Simply Essential and many more like that. It wasn’t and isn’t profitable due to goodwill charges, but it has been free cash flow positive because goodwill doesn’t affect cash flow. Even in the pandemic year it was cash-flow positive. It’s been using that free cash flow to buy back shares and to pay down debt, both good uses, potentially, if the shares end up doing well. It plans to continue doing that. It has just enough cash to cover all its debt, not including leases. It’s been buying back shares for years and years in different quantities and increased its three-year repurchase program to $1 billion. Over the next three years, they may be buying back about a third of its $3 billion in market cap. Retail in turmoil is tough. We all remember Sears and JCPenney and J.Crew. Still management seems to be doing the right things and making the hard decisions. It’s not bad. Maybe worth a peak for those for with a value bent. Matt.
Matt Frankel: The thing that Bed Bath & Beyond has going for it is they sell essential goods, they sell things that people need quickly. They’re somewhat insulated against e-commerce. When we need the housewares, that’s the closest store to my house. So we go there. That’s one type of retail I like to invest in. This is why Target and Walmart have performed so well over the years. Not that Bed Bath & Beyond is quite in their league, but they are of the same concept in that they are not necessarily discretionary retail. I’m a fan of the company. I don’t really want to own the stock that much, but I like the business. I could see why this was your No. 4 and my No. 2, and somehow tied for No. 1.
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