A Bed Bath & Beyond Turnaround May Be Out of Reach, Loop Says

(Bloomberg) — Bed Bath & Beyond Inc.’s (NASDAQ:) new chief executive officer has his work cut out for him, and it appears even more challenging than expected, analysts say.

The company may be “too far gone for a turnaround to ultimately succeed,” Loop Capital’s Anthony Chukumba said Wednesday, after the home goods retailer’s holiday sales decline and shrinking gross margin sent shares plunging 25% ahead of the bell. The stock is poised to fall to its lowest level since October.

The update was worse than than he and other analysts expected, leading Chukumba to question the “recently-minted president and CEO’s decision to fire nearly the entire senior management team prior to the crucial holiday selling season.” He lowered his price target to $12 per share from $15, but maintained his rating at hold, giving CEO Mark Tritton the “benefit of the doubt.”

Chukumba isn’t alone in his view. Telsey analyst Cristina Fernandez believes Tritton will need to make “more aggressive changes,” while Baird’s Peter Benedict believes the dividend is at risk given the “deteriorating” free cash flow profile. Benedict rates the stock neutral, with a $10 price target, cut from $15.

Still, Fernandez maintained her outperform rating amid her belief that the new management team can make “meaningful changes” to merchandising, stores and e-commerce capabilities, and ultimately improve performance. Her price target is $15, down from $18.

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