Bed Bath & Beyond Inc. stocks drop after fourth-quarter earnings release

Bed Bath & Beyond Inc. (BBBY) swung to a profit in its fiscal fourth quarter as the company rebounded from selling underperforming brands and closing stores during the pandemic.

The company earned a net income of $9.1 million, or 8 cents per diluted share, compared with a net loss of $65.4 million, or 53 cents per diluted share, in the year-ago period. 

According to The Wall Street Journal, analysts had a consensus earnings estimate of 31 cents.  

Bed Bath & Beyond, which is headquartered in Union, Jersey, sells a variety of home goods, including dinnerware, décor, small appliances, bedding and bath towels. It had 1,020 stores on the last day of the fourth quarter, Feb. 29.

In the fourth quarter, the company sold underperforming brands as part of a plan President and CEO Mark Tritton introduced after taking over in October 2019 to slim down operations, the company said in its April 14 earning press release. Additionally, the company closed 63 Bed Bath & Beyond stores last year, it said in a Jan. 19 press release. 

The company reported a fourth-quarter net sales of $2.6 billion compared with $3.1 billion net loss from the same quarter last year. That’s a percentage change of about 19%. These two sentences could be written as one sentence.

Bed Bath & Beyond also reaffirmed its fiscal 2021 outlook for net sales of between $8 billion and $8.2 billion in its press release. The company’s 2020 fiscal net sales were $9.2 billion, it said.

During the fourth quarter, Bed Bath & Beyond completed its sales of Cost World Plus Markets, Christmas Tree Costs, One Kings Lane, Personalization Mall and Linen Holding, its press release said.

The company’s divestment in failing brands and investment in Owned Brands, Nestwell, Haven, Simply Essential and other new brands will put its sales back on track, Tritton said in the press release.

“As our transformation continues to take hold, we will show up differently for our customers with enhanced omnichannel experiences and modern stores, new communications and differentiated Owned Brands that will elevate the shopping experience and make it even easier to shop with the new Bed Bath & Beyond,” Tritton said in the press release.

However, many analysts said they have concerns about Bed Bath & Beyond’s performance compared to competitors, such as At Home Inc. and Williams-Sonoma, Inc.

Christopher Graja, an analyst for Argus, maintained a hold rating on Bed Bath & Beyond because of COVID-19’s lingering effects on retail and the effects of closing stores on its quarter four ratings, he said in an April 14 research note. Nonetheless, he is optimistic about the company’s outlook under Tritton’s leadership since taking the reins, he said.

“New CEO Mark Tritton has been moving quickly and aggressively to cut costs and generate cash by restructuring operations, cutting inventories, selling real estate, reducing debt and selling an ancillary business,” Graja said.

KeyBanc analyst Bradley Thomas has an underweight rating on the company, he said in an April 14 note. However, its competitors are seeing higher sales both online and in physical stores, Thomas said in the note.

“In a normal environment, we expect the new board and management team to find assets to monetize, costs to cut (in the hundreds of millions of dollars) and merchandising and sourcing opportunities (in the hundreds of basis points),” Thomas said. “Furthermore, recent trends suggest that Bed Bath & Beyond remains a significant underperformer amidst a robust industry backdrop.”

Wells Fargo analyst David Lantz has an underweight rating and a 52-week price target of $22, according to his April 14 note. Tritton and his team have helped the company grow sales, Lantz said.

Bed Bath & Beyond’s first- quarter earnings are on track to grow 65% to 70% compared to a decline of 49% in the year-ago period, Lantz said. However, the company still has a lot of challenges ahead that may hinder growth, Lantz said.

Loop Capital Markets analyst Anthony Chukumba has a hold rating on the company with a 52-week target price of $24 in his April 14 note. Before the earnings report, Chukumba had a price target of $30.  

“We believe Bed Bath & Beyond’s recent trends are all the more underwhelming considering the US housing market is the strongest it has been in well over a decade,” Chukumba said in a note. “We continue to think Bed Bath & Beyond is losing relevance with consumers — and as a result, market share.”

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This story was originally written for a Medill business course.