Bed Bath & Beyond (BBBY) Down 25.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Bed Bath & Beyond (BBBY). Shares have lost about 25.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Bed Bath & Beyond due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Bed Bath & Beyond’s Q3 Loss Wider Than Expected, Sales Lag
Bed Bath & Beyond continued its dry spell with dismal third-quarter fiscal 2022 results. Both top and bottom lines not only missed the Zacks Consensus Estimate but also declined year over year. Although the company made efforts to change the assortment, and other merchandising and marketing strategies, inventory constraints acted as headwinds.
The home goods retailer is reeling under dwindling cash position as suppliers demanded stringent payment terms right before the pivotal holiday shopping season. Also, fewer products on its shelves led to reduced customer traffic.
Management noted that it intends to lay off more employees to reduce costs. Earlier, it announced to close 150 stores and lay off 20% of its corporate and supply-chain workforce. Also, the company failed to convince bondholders to swap out their investments for new debt.
In a recent development, BBBY revealed that it is exploring options, including bankruptcy, after continuous weak sales performance. That said, the company is leaving no stone unturned to increase in-stock levels to meet demand via using liquidity it gained from holiday sales.
Q3 in Detail
Bed Bath & Beyond reported an adjusted loss of $3.65 per share in the fiscal third quarter compared with a loss of 25 cents in the year-ago quarter. The figure was also wider than the Zacks Consensus Estimate of a loss of $2.36.
Net sales of $1,259 million declined 33% year over year and missed the Zacks Consensus Estimate of $1,379 million. Comparable sales (comps) fell 32% year over year. For stores, comps declined 31% year over year, while the same dropped 33% across the digital channel.
The Bed Bath & Beyond banner’s comparable sales fell 34% year over year, while the buybuy BABY banner’s comparable sales declined year over year in the low twenties.
The adjusted gross profit slumped 57.4% to $287.4 million in the fiscal third quarter. Also, the adjusted gross margin contracted 1310 basis points (bps) to 22.8% due to the adverse impacts of Owned Brands’ clearance activity and higher promotional.
SG&A expenses slumped 16.3% to $583.6 million in the reported quarter, driven by cost optimization plans. SG&A expenses, as a percentage of sales, expanded 1070 bps year over year to 46.3%. The company is on track to meet its target of a SG&A expense reduction of $250 million.
Adjusted EBITDA was a negative $225 million against earnings of $40.6 million reported in the year-ago period. The decline was mainly due to sluggish sales and dismal margins.
Financial Position
Bed Bath & Beyond ended the fiscal third quarter with cash and investments of $153.5 million. Long-term debt was $1,935.4 million and the total shareholders' deficit was $798.6 million as of Nov 26, 2022. It also had a strong liquidity of $0.5 billion as of Nov 26, 2022.
In the fiscal third quarter, cash used in operating activities was $307.6 million and capital expenditure was $95.6 million.
Store Updates
In the fiscal third quarter, it closed six stores. As of Nov 26, 2022, the company had 949 stores in operation, comprising 762 namesake stores across 50 states, the District of Columbia, Puerto Rico and Canada; 137 buybuy BABY stores; and 50 stores under Harmon, Harmon Face Values or Face Values names. Additionally, the company’s joint venture operates 12 flagship stores in Mexico.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -85.36% due to these changes.
VGM Scores
At this time, Bed Bath & Beyond has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Bed Bath & Beyond has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Bed Bath & Beyond Inc. (BBBY) : Free Stock Analysis Report
