Bed Bath & Beyond Appears to Be in Serious Trouble

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

Bed Bath & Beyond issued a lousy outlook last week, sending the stock to a nearly 10-year low.

Sign at a Bed Bath & Beyond store on April 10, 2013 in Los Angeles, California. (Credit: Kevork Djansezian/Getty Images)

Sign at a Bed Bath & Beyond store on April 10, 2013 in Los Angeles, California. (Credit: Kevork Djansezian/Getty Images)

Credit ratings agency Standard & Poor's cut its rating on Bed Bath & Beyond late Tuesday to a BBB- level, the lowest that S&P still considers investment grade. S&P warned that it could soon downgrade Bed Bath & Beyond's bonds to junk, if "the company cannot stabilize operating performance in the face of continued intense competition from online retailers."

That could make it more difficult for Bed Bath & Beyond to borrow more money and will likely increase the amount of interest it has to pay on its existing long-term debt load, which stood at about $1.5 billion as of the end of its most recent quarter.

Related: Retail defaults soar to a record high in 2018

The company was not immediately available for comment about the recent downgrades.

But Bed Bath & Beyond remained upbeat about its future in its recent earnings report. It even boosted its dividend payment to shareholders, saying that it was "a reflection of the long-term health of the business."

And the stock actually rose 5% Wednesday due to rumors that hedge fund JANA Partners or other activist investors were thinking about taking a stake in the company. JANA was not immediately available for comment.

Still, higher expenses resulting from the credit downgrade -- or a pesky new shareholder -- are the last things that Bed Bath & Beyond needs.

Moody's, another major credit rating firm, cut its rating on Bed Bath & Beyond back in January as well. Moody's now has Bed Bath & Beyond's bonds rated Baa2 -- two notches above junk level.

Moody's vice president Mickey Chadha also cited "increased competitive and pricing pressures from e-commerce and other large discount retailers," adding that competition "has compelled the company to maintain a highly promotional marketing strategy."

Bed Bath & Beyond, like many other traditional retailers, is facing intense competition from Amazon, Walmart and Home Depot as well as other specialty e-commerce companies like Wayfair.

In fact, Wayfair just announced a new gimmicky promotion Wednesday. It's proclaiming that April 25 will be Way Day and is planning to offer what it describes as "Black Friday-low prices for 24 hours on thousands of popular home furnishings."

Say what you want about the need for a Black Friday event on a Wednesday seven months before the real thing. But as long as Wayfair, Amazon and others are slashing prices on furniture and other home goods, that's bad news for Bed Bath & Beyond.

Notice: you are using an outdated browser. Microsoft does not recommend using IE as your default browser. Some features on this website, like video and images, might not work properly. For the best experience, please upgrade your browser.