I recommend selling Bed, Bath and Beyond (BBBY) as the stock cannot hold on to any rally attempts. Furthermore, although the shares remain very inexpensive, there is too much risk in continuing to hold them in front of Wednesday’s earnings report.

With some retailers now selling for price to earnings multiples of 6X or below in the current toxic market environment that is the retail sector, there is a decent chance that the stock will trade at less than $10 following Wednesday’s report.

In this report, I also expect that guidance regarding the management’s previous range of $2.11 to $2.20 a share will be reduced, given a weakness in consumer spending, the need for new investments and the new management’s likely desire to curb investor expectations as they plan the next steps in their restructuring of the company.

If this was any other time, I would be willing to ride out further weakness in the stock. However, as we are in a period where no mercy is being shown to retailers that show any signs of struggling and since an illogical fear of Amazon.com (AMZN) remains present, it is simply not worth the risk of holding shares in a company that will undergo a restructuring soon.

Our two other retailers, Party City (PRTY) and Big Lots (BIG), have similarly depressed valuations, but their stable results make them a better choice to participate in what will be an inevitable bounce for small capitalization retail stocks.

Sell BBBY. If you are following the Inner Circle Model Portfolio, sell BBBY as well.