Turnarounds

Bed Bath & Beyond Shares Fall 10% on Earnings Miss

The retailer "still has a long runway ahead of it before it will realize the benefits" of its turnaround strategy, analysts say.
Matthew HellerDecember 22, 2016
Bed Bath & Beyond Shares Fall 10% on Earnings Miss

Bed Bath & Beyond shares fell sharply after the retailer reported a miss for third-quarter earnings, casting further doubt on the prospects for its turnaround plan.

For the quarter ended Nov. 30, Bed Bath & Beyond earned $126.4 million, or 85 cents a share, down from $177.8 million, or $1.09 a share, a year earlier. Sales were flat at $2.95 billion.

Analysts surveyed by Thomson Reuters had projected earnings of 98 cents a share on $3.01 billion in sales.

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Overall comparable-store sales declined about 1.4%, compared with a year-earlier decline of 0.4% and analysts’ projection for an increase of 0.5%. Comps from Bed Bath & Beyond’s digital channels rose more than 20% but those from brick-and-mortar stores declined in the low single-digit percentage range.

After the earnings announcement, the company’s shares dropped 10.2% on Thursday to $41.02 as analysts suggested its efforts at a transformation may take some time to gain traction.

“Even we can be patient for only so long, and it seems that Bed Bath & Beyond still has a long runway ahead of it before it will realize the benefits of its technology investments, membership program and more recent investments in One Kings Lane and PMall.com,” Raymond James analysts wrote in a note to clients.

Bed Bath & Beyond acquired PersonalizationMall.com in November for $190 million. According to MarketWatch, the personalization products market is estimated to be $15 billion with a high-single-digit annualized growth rate.

The company has also launched the Drapery Design Gallery in select stores and online, opened Beyond at Liberty in Brooklyn, a 120,000-square-foot store that houses a number of its brands in the same space, and is testing a membership program.

For the full year, Bed Bath & Beyond is now forecasting per-share earnings to be near the low end of the $4.50 to $5.00 range that has been typical in recent years.

“The company is working to differentiate its offering, accelerate growth online and match competitors on price, but these initiatives are being overwhelmed by declines in store traffic,” Wedbush analysts wrote in a note.

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