Bed Bath & Beyond execs ‘got it backwards’ with stock buybacks, expert explains

Washington Post Contributor Allan Sloan joins Yahoo Finance Live to discuss the next chapter for Bed Bath & Beyond as the retailer faces a series of setbacks.

Video transcript

- Bed Bath & Beyond shares off nearly 20% this afternoon as the struggling retailer looks to restructure its business. Our next guest argues that the company could have been in a much better shape if it didn't spend tons of money buying back its own shares. We want to bring in Allan Sloan, a Yahoo Finance contributor joining us now. Allan, it's great to have you here on Yahoo Finance. You recently wrote for the site, just talking about the amount that Bed Bath & Beyond has spent on buying back its own shares. How much more severe do you think the company's problems are because of this?

ALLAN SLOAN: Well, all right, since 2004, which admittedly was a while ago, the company has spent almost $12 billion buying in its own stock. That's more than 3/4 of its stock. It currently has a net a trading value of $450 million. And it's spent 20 times that much buying in its own stock. In the most recent year, it spent a couple of hundred million dollars buying in its own stock. And that's money the company is now borrowing, and heaven only knows what percent as part of its attempt to save itself.

- Was it the act of buying stock back, or was it the actual price they were paying in this case?

ALLAN SLOAN: Well, it's the amount of cash that they shelled out. And what struck me, I got interested in this last week, when the company announced its magic restructuring program, that they were going to sell-- or they want to sell 12 million shares. And I started poking around in the numbers, and I saw that 12 million shares at that point would have been $100 million. Now it's $80 million.

And the company had spent a lot more than that per share buying in its own stock. And since I have three daughters, who are all mature, and all adults, and all shopped, the idea of a company like Bed and Bath, it's supposed to buy stuff cheap and sell it dear. But somehow they got it backwards when it came to their stock because they paid a dear price, and now maybe if they sell it, they'll be selling it cheap.

- So what could they have done differently, now that we see the position that they're in?

ALLAN SLOAN: Well, what they could have done was, say, two years ago, when they started to have real trouble during COVID, they could have stopped buying in their own stock, for starters. I mean, I'm not a great merchandise person. I have no idea what they should do with their stores. I don't know what they should do with Buy Buy Baby. I have no idea.

But I know that the hundreds of millions of dollars that advance spent to buy in its own stock is money it would dearly love to have now and its paying heaven only knows how much to borrow. It's really, horribly unfortunate. And by the way, I happen to live, not very far from where Bed and Bath's headquarters is. So to me, this is a local company. This isn't some meme stock. This isn't some joke. This is a local company that's getting clobbered. And it's very sad. And they would be a lot less clobbered if they didn't have to go out and borrow all this money.

- Yeah, Allan, I know you've written about the fact that it has become this meme play. It's a lot more than that. It's affecting thousands and thousands of people's lives. Clearly, when you take a look at a company like this struggling and the roller coaster ride that the stock has been on, to say the least, over the last several months. I know you've been a business reporter, a business journalist now for quite some time. How does this compare to maybe some of the other struggling companies that you have covered in the past?

ALLAN SLOAN: Well, I actually care about this one. It's not just a subject. To me, it's a local institution that's getting clobbered. And I've written a lot about financial problems and financial excesses. But I have to say, I have never seen a company buy in 3/4 of its own stock at a price something now like 5 and 1/2 or 6 times per share what its price is now. I mean, it's just a disaster. I just hope the company survives.

- Is Chapter 11 likely?

ALLAN SLOAN: I don't know. I don't know what they're going to do. I mean, If I--

- I want to ask you--

ALLAN SLOAN: No, I'm sorry. Go ahead.

- Sure. So as you step back and look at other retailers, obviously a lot of them are still struggling with a lot of these issues, whether it's supply chains, really figuring out what the consumer wants, what is it you think that Bed Bath & Beyond really didn't understand about, perhaps, the consumer market that it was in?

ALLAN SLOAN: I don't know. I'm just a consumer. But they just had endless problems. And one of the things that they did, which I'm sure you've discussed on this program, is they brought in somebody who they've now thrown out, who was going to rescue them, and they totally changed their merchandising plan.

And instead of selling branded stuff, tons and tons of branded stuff, the stuff my wife and kids and I would go out and buy, they decided to go into their house brands, which apparently nobody wanted. And now they're trying to go back the other way. I don't know much about Macy's or any of these other companies. But I don't think any of them are making that U-turn.