Once 'Smoke Clears' At Bed Bath & Beyond, Jim Cramer Sees Target On Top

Bed Bath & Beyond Inc BBBY shares have seen increased volatility in 2023 on the heels of an announcement that it was exploring strategic alternatives, including potential bankruptcy. 

With new reports suggesting bankruptcy is near, don't forget Jim Cramer believes Target Corp TGT stands to benefit from Bed Bath & Beyond's downfall. 

"When you get a going concern letter, that really means that you're just in real trouble and you're going to have to close a lot of stores," Cramer said in January on CNBC's "Squawk On The Street." "And I know, from the work I've done, that Target has the most stores that are next to Bed Bath."

See Also: Here's Why Bed Bath & Beyond Analyst Sticks To Underperform Rating & Cuts Price Target By 33%

What To Know: Earlier in the year, Bed Bath & Beyond provided preliminary results that were well below expectations, blaming its weak performance on lower customer traffic and reduced levels of inventory availability.

Bed Bath added "the company has concluded that there is substantial doubt about the company's ability to continue as a going concern" and noted that it's considering "all paths and strategic alternatives." Now it appears a Chapter 11 filing is closer than ever. 

Cramer told CNBC that one of those paths will include a sizable amount of store closings. Based on Target's retail store proximity to Bed Bath, he believes the home furnishings retailer's unraveling will be positive for Target. 

"When the smoke clears, Target is the winner off of the Bed Bath problems," Cramer said.

Target stock will trade lower in the near term as it continues to run through excess inventory, but following a leg down, investors "have to look at it," he added.

"I don't think that Target is doing nearly as badly as the analysts say because they're not projecting any problems with Bed Bath. And those problems are going to play right into the hands of this company," Cramer said.

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BBBY, TGT Price Action: Bed Bath & Beyond shares are down more than 80% in 2023 and more than 97% over a one-year period. Target shares are up approximately 8% year-to-date.

Some elements of this story were previously reported by Benzinga and it has been updated.

Photos: Mike Mozart from Flickr.