Why Bed Bath And Beyond Shares Are Plunging

Bed Bath and Beyond announced third quarter earnings of $0.95 a share, or $228.5 million, up 28% and topping analyst expectations.

However, revenue at the Union, N.J., based retailer missed forecasts by $250 million, coming in at $2.34 billion. The top-line miss has sent shares down more than 5% this morning in trading.

Bed Bath and Beyond also guided strongly, but could not overcome tough comparisons — in the past it had quarters where same-store sales surged more than 7%. As for the whisper number, or the earnings figure that Wall Street buy-side and independent analysts actually expect the company to post, it may have been higher than the published $0.89 compiled by FactSet.

Analysts are weighing in. Below, a sampling of what sell-side research teams are saying:

• Peter Benedict of Baird: "Comp of 4.1% was at high end of 2%-4% plan though fell shy of our 5%E (and whispers). Similar to 2Q, comp reflected increases in both traffic and ticket. Of note, comps slowed from 2Q's 5.6% despite accelerating industry sales (+4% vs. 2Q's +1.3%)."

• Kate McShane of Citi: "We are encouraged by continued strength in the business (both ticket and transactions increased in 3Q) and believe our LT thesis on the name remains intact despite a still challenging macro backdrop and continued difficulties in the housing market."

• Mike Baker of Deutsche Bank: "Favorable gross margin drivers did not include a mention of fewer coupon redemptions as has been the case throughout the year. This probably means consumers were more active with coupons this quarter. We think this is in line with what other retailers saw this holiday season, as we infer that holiday sales were strong, but coupon driven."

• John Marrin of Jefferies: "3Q sales were a little light of our expectations, but the margin performance was solid on lower markdowns and lower ad expense. For the first time in over five years, sales growth was in line with industry growth, and while we think the company can jump start market-share gains next year, the choppy retail environment warrants a wait-and-see approach."

• David Gober of Morgan Stanley: "3Q results reinforce our view that BBBY faces increasing headwinds to its top-line over the next 1-2 years. The company posted EPS of $0.95, which was ~8% above our and consensus estimates, but sales were in-line with expectations as comp store sales growth slowed to 4.1% from 6.3% in 1H."

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