Summary

• Although Bed Bath & Beyond has outperformed the S&P 500 since its IPO, the stock was a horrible investment in the last three years.
• Declining gross and operating margin, declining same-store sales, and declining net income should have been warning signs.
• Management responded several years too late, but is now investing in digitalization, new store concepts, and private brands to manage the turnaround.
• Assuming that Bed Bath & Beyond found its bottom and can generate at least stable free cash flow, the stock is undervalued.

One of my worst investments so far was Bed Bath & Beyond (NASDAQ:BBBY) - a chain of American merchandise retail stores, which sells primarily home goods for the bedroom, bathroom, kitchen, and dining room. I already wrote about BBBY at the end of 2017 as it was already among my worst investments back then when the stock was still trading above $20. At that point, BBBY already lost about 75% of its value since the highs in 2014 and 2015, but the decline continued during 2018, and BBBY once again cut its value in half and bottomed at $10.46. Although Bed Bath & Beyond's stock price rallied since December 2018 and gained more than 85% (and clearly outperformed the S&P 500), it already declined again in the last two weeks after earnings and is still a terrible investment for me.

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