Bed Bath & Beyond’s new CEO bets big that the company won’t go under
Bed Bath & Beyond’s interim CEO is betting big — with her own money — that she can save the struggling retailer from going out of business, despite what some analysts are speculating.
Sue Gove purchased $230,500 worth of stock in the home goods retailer, according to a new SEC filing released after the close of trading on Wednesday.
Shares rose more than 20% in early trading on Thursday. The stock has crashed nearly 70% year to date following a string of poor results and failed turnaround strategies.
Gove, who was previously a board member, replaced ousted CEO Mark Tritton last week after another dismal quarter put the company’s financials in a very precarious position ahead of the crucial holiday shopping season.
Bed Bath & Beyond announced a quarterly adjusted operating loss of $224 million. The retailer ended the quarter with only $107 million in cash, prompting BofA analysts to issue a warning on the company’s liquidity position.
“Liquidity is now our top concern after the company burned over $500 million in 1Q,” BofA Analyst Jason Haas stated in a note titled: “BBBY’s liquidity circles the drain.”
The company also reported that it saw same-store sales crash 27% at its namesake brand in the most recent quarter as shoppers pulled back on discretionary purchases. Shoppers also continued to shun the retailer’s move to scale back coupons.
Gove’s immediate to-do list regarding the effort to save the company is plentiful.
First, the veteran retail executive must stabilize the company. That is likely to include the long sought after sale of the buybuy Baby store chain, the return of more name brands to stores (which should alleviate supply chain issues), and a steadier cadence of discounts to win back customers.
Gove may also have to raise cash through new debt or a share issuances to temper concerns among vendors about getting paid for their goods.
And lastly, Gove must gain the support of key shareholders like GameStop chairman Ryan Cohen. Cohen (who is indeed still a BBBY shareholder, a source tells Yahoo Finance) has been agitating for change at Bed Bath & Beyond for months. It’s clear his concerns haven’t really been heard at the same time in which the value of his investment has gone sharply lower. Not a good look.
Winning over the retail investor influencer Cohen — who has been taking thinly veiled shots at Bed Bath & Beyond on Twitter since the executive upheavel last week — is important.
Even if Gove manages to pull off this long list within 12-months, analysts covering the company think that the business is toast.
“We are looking at a situation in which this company is probably not going to be around,” Loop Capital Analyst Anthony Chukumba told Yahoo Finance Live (video above). “It’s not going to take years. We could be talking about months at this point. We are in the end days. These results were a dumpster fire. There is no other way to put it.”
Gove is literally betting on analysts, including Chukumba, being wrong.
This post has been updated with the latest stock move.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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American Weed Stocks Are Cheap. They’re About to Get a Sales Bump.
However bad the year has been for most stocks, it has been especially harsh for state-licensed cannabis sellers.
In just the past month, the
AdvisorShares Pure US Cannabis
exchange-traded fund (ticker: MSOS), which tracks America’s multistate operators—or MSOs—fell 25%, while the
How Do Mega Backdoor Roths Work?
A mega backdoor Roth is a unique 401(k) rollover strategy that’s designed for people whose incomes would ordinarily keep them from saving in a Roth Individual Retirement Account. The advantage of using a Roth IRA to save for retirement is being able to make tax-free qualified withdrawals. But not everyone can contribute to these accounts; higher-income earners are excluded. That’s where the mega backdoor Roth comes into play. If you have a 401(k) you’d like to roll over, you could use this strategy to enjoy the tax benefits of a Roth IRA without having income be an obstacle.
Make sure you’re taking advantage of every opportunity to maximize your retirement assets by working with a financial advisor.
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Single filers: MAGI of $125,000 or less
Married filing jointly: MAGI of $198,000 or less
Head of household: MAGI of $125,000 or less
You can make partial contributions above those income limits. But your ability to contribute phases out completely once your MAGI hits $140,000 (if you file single or head of household) or $208,000 if you’re married and file a joint return. For 2021, the full contribution allowed is $6,000 with a $1,000 catch-up contribution for savers aged 50 and older.
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What Is a Backdoor Roth?
A backdoor Roth offers a work-around for people whose incomes are above the limits set by the IRS. When you execute a backdoor Roth, you roll money over from a traditional IRA to a Roth account. This way, you won’t have to pay taxes on your retirement savings in the Roth IRA when it’s time to make withdrawals. And you’re not subject to required minimum distribution rules either.
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How a Mega Backdoor Roth Works
A mega backdoor Roth is a backdoor Roth that’s designed specifically for people who have a 401(k) plan at work. This type of backdoor Roth allows you to contribute up to $38,500 to a Roth IRA or a Roth 401(k) in 2021. This is in addition to the regular annual contribution limits the IRS allows for these types of accounts. To execute a mega backdoor Roth, two conditions have to be met. Your 401(k) plan needs to allow the following:
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You also need to watch out for the pro rata rule. This IRS rule says you can’t only withdraw pre- or post-tax contributions from a traditional 401(k). So if you’re completing a mega backdoor Roth, you couldn’t just withdraw post-tax contributions if your account holds both pre- and post-tax funds. In that case, you may have to roll over the entire balance to a Roth IRA.
Benefits of a Mega Backdoor Roth
There are three key benefits associated with executing a mega backdoor Roth. First, you can contribute significantly more to a Roth IRA upfront this way. For 2021, the contribution limit is $38,500 on top of the regular annual contribution limit and any catch-up contribution limits that may apply.
You’ll need to know the maximum amount you’re allowed to contribute to the after-tax portion of your 401(k). So for 2021, the IRS allows a maximum contribution of $58,000 or $64,500 if you’re 50 or older. You’d subtract your 401(k) contributions and anything your employer adds in matching contributions to figure out how much you could add to the after-tax portion.
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Finally, a mega backdoor Roth IRA would allow you to sidestep required minimum distribution rules. This means that you could retain control over when you choose to take distributions from a Roth IRA.
So who is a mega backdoor Roth right for? You may consider this move if you:
Have an eligible 401(k) plan at work
Have maxed out traditional 401(k) contributions
Are not eligible to contribute to a Roth IRA because of your income
Have additional money that you want to invest for retirement
Want to leverage the higher Roth IRA contribution limits allowed by a mega backdoor rollover
Talking to your financial advisor can help you decide if a mega backdoor Roth makes sense. And your 401(k) plan administrator should be able to tell you if it’s possible, based on your plan’s guidelines.
Mega Backdoor Roth Alternatives
If you can’t execute a mega backdoor Roth because your plan doesn’t allow it, there are other ways to increase your retirement savings. For example, you could try a regular backdoor Roth instead. This might be something to consider if you still want to enjoy the tax benefits of a Roth IRA but your plan doesn’t fit the criteria for a mega rollover. You could also elect to make Roth 401(k) contributions to your retirement plan at work. This way, you still get the benefit of contributing after-tax dollars and making tax-free withdrawals. You’d be subject to the regular contribution limits and you’d still have to take the required minimum distribution. But that may outweigh the value of tax savings in retirement.
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A mega backdoor Roth strategy could work well for higher-income earners who want to take advantage of Roth account benefits. There are certain rules that need to be followed to make it work, however, so you may want to talk to your plan administrator or a tax professional before going ahead. Keep in mind also that even if you can’t complete a mega backdoor Roth rollover, you still have other options for growing retirement savings.
Tips for Retirement Planning
If you’re saving for retirement in a 401(k) or IRA, pay attention to the fees you’re paying. For instance, check the expense ratios for each fund you’re invested in to understand how much you pay to own that fund on an annual basis. You can then compare that to the fund’s performance to determine whether the fees are justified. Also, consider any administrative fees you might be paying and how those affect your net returns.
Consider talking to your financial advisor about a mega backdoor Roth and whether it could be right for you. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors in your local area. You can get your personalized recommendations in minutes just by answering a few simple questions. If you’re ready, get started now.
Photo credit: ©iStock.com/designer491
Alibaba Is Tumbling. Chinese Tech Stocks Have a New Headache.
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