Wall Street may want to revisit its initial reaction to Bed Bath & Beyond’s (BBBY) earnings release this week.
Shares of the home goods retailer plunged 11% on Thursday after the company fell short versus estimates for its fiscal third quarter earnings and guided cautiously for the current quarter. The company pinned the blame on COVID-19-related traffic challenges at stores and some execution issues at the Buy Buy Baby kids brand.
Here’s how Bed Bath & Beyond performed in the quarter compared to analyst forecasts.
Net Sales: $2.618 billion vs. $2.747 billion
Adjusted EPS: $0.08 vs. $0.19
But lost in the typical earnings day hoopla are several overlooked facts.
First, the turnaround at Bed Bath & Beyond under CEO Mark Tritton continues. The company’s same-store sales for its top five product categories surged 11% in the quarter. Together, these categories make up about two-thirds of the business. That performance is critical to see as Bed Bath & Beyond is paring nearly $1 billion in excess inventory from its stores to become a true destination for home goods.
These sales gains suggests shoppers are noticing the early work by Tritton to focus the company’s strategy.
Meanwhile, gross margins expanded 310 basis points from the prior year as Bed Bath & Beyond pulled back on promotions. Sales didn’t fall off a cliff as the company reined in its notorious coupons, a good sign. And lastly, the company told the Street sales in December were positive.
And they appear to continue to be trending well, Tritton told Yahoo Finance Live.
“We’re seeing good early signs in January,” Tritton said. Tritton added that guidance for the current quarter of unchanged year-over-year sales and gross margins may prove conservative. Upside to guidance is possible if consumers spend their new stimulus checks on home goods, Tritton hinted.
Shares rose about 2% on Friday.
Next up for Bed Bath & Beyond in terms of potential catalysts. The long-awaited launch of a barrage of new private label brands. Tritton is no stranger to such a rollout — he led the successful development of Target’s private label brand strategy as chief merchant.
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