Bed Bath & Beyond Inc.
Thesis
We believe Bed Bath & Beyond is an exceptional business with a leading position in the housewares retail category and a return on invested capital consistently above 20%. The company has a strong cash flow and has returned significant capital to shareholders through buybacks, which we expect to continue driving EPS growth. With a target price of $105 per share based on medium-term earnings power of approximately $7 per share, we see substantial upside from the current price of around $75.
Did it work?
The long thesis rested on Bed Bath & Beyond being an exceptional business with >20% ROIC, durable cash flows, and continued buybacks supporting a $105 target from ~$75. Instead, the stock fell 94.8%, a collapse that decisively invalidates the core claims about business quality and earnings power regardless of the stated horizon. A drawdown of this magnitude reflects fundamental deterioration (the thesis's premise was broken, not merely a price fluctuation), making this a clear failure.