Bed Bath and Beyond shares fell on Wednesday as the housewares retailer reported a loss for the holiday quarter, spoke of struggles with low inventories and congested ports and warned that consumer demand is slowing.
CEO Mark Tritton said that out-of-stock items meant the company missed about $175 million in fourth-quarter sales. That’s up from the previous quarter, when supply chain bottlenecks cost the company about $100 million.
Tritton said in a CNBC interview that the home goods retailer was disappointed with its results. He said “major headwinds in the macro environment” have slowed the company’s turnaround efforts.
For example, he said, moving goods costs more and some top-selling items from national brands are in short supply due to missing components, like microchips that go in a vacuum. Also, he said, most seasonal goods got stuck at ports and arrived late.
In a conference call following the company’s earnings report, Chief Financial Officer Gustavo Arnal said challenges continued in the first quarter. He said consumers are feeling growing uncertainty, leading to a drop in demand. So far in the first quarter, same-store sales are down about 20% — a sharper drop than the previous three months.
Bed Bath didn’t provide specific guidance on Wednesday, but said it expects sales and margins to improve in the second half of the upcoming fiscal year as supply chain conditions ease.
Here’s how the retailer has fared in the three months ended February 26, compared to analysts’ expectations based on data from Refinitiv:
- Loss per share: 92 cents vs. expected earnings of 3 cents
- Revenue: $2.05 billion versus $2.07 billion expected
The company’s net loss increased to $159 million, or $1.79 per share, compared to net income of $9 million, or 8 cents a share, a year earlier. Excluding one-off effects, she lost 92 cents per share. Analysts polled by Refinitiv had expected earnings per share of 3 cents.
Revenue fell 22% to $2.05 billion, compared to $2.62 billion a year earlier. That fell short of estimates of $2.07 billion.
Same-store sales, a key retail metric, fell 12% across Bed Bath’s store compared to the prior-year period. Same-store sales were down 15% for the Bed Bath & Beyond banner and increased in the low single digits for the BuyBuy Baby banner.
Digital sales were down 18% compared to the same period last year, partly reflecting the shift back to stores and the normalization of e-commerce levels.
A bumpy ride
Bed Bath has been on a bumpy road as Target veteran Tritton has attempted to refresh the retailer’s brand with launches of private label products, store remodels and closures of underperforming locations. Its shares have been dragged into meme stock rallies along with AMC Entertainment and GameStop.
As of Tuesday’s close, Bed Bath’s shares were up about 23% so far this year, well ahead of retail and the broader market. The retailer’s stock closed at $17.97 fell 6.75% on Tuesday, taking its market value to $1.73 billion.
The retailer has also come under pressure from investors — including activist Ryan Cohen, chairman of GameStop and founder of Chewy.
The retailer recently struck a deal with Cohen’s company RC Ventures, agreeing to add new board members and explore whether to spin off or sell its BuyBuy Baby business, which has been one of its bright spots.
Still, Tritton said Bed Bath is making progress on its transformation. He said it’s investing in technology, winning back customers with postcards and targeted emails, and growing its more profitable private label business.
He said Bed Bath is completely overhauling its supply chain so it can better manage all of its goods as it imports goods and transports them to distribution centers and stores. He said the technology, which works like “a virtual control tower,” will be operational by the end of this month. The company is adding more regional distribution centers on both sides of the country. Those efforts are already underway but have become more urgent, he said.
“The timing of that push and the timing of completing the strategy is the friction point,” he said.
Some analysts and trading experts are not convinced.
Neil Saunders, managing director of GlobalData Retail, called the Bed Bath results “absolute carnage”. He said Bed Bath needs to repair its operations or risk seeing sales fall further.
He also cast doubt on the company, which partially attributed its performance to geopolitical dynamics – noting that its quarter ended just two days after Russia invaded Ukraine.
“These results are very, very bad and I know they’re trying to pin them down to external factors and I understand why – I would probably do the same,” he said. “But now the coming year is really a test for them because they now have to prove that the strategy they are putting in place has legs and can work in the long term.”
Saunders said the retailer needs to carve out its own identity instead of copying competitors like Target and act faster to reflect consumer sentiment on its website and with in-store displays. For example, he said it missed the “cozy” trend in the early months of the pandemic by not bringing bedding and other related housewares outside the store.
CNBC reached out to Bed Bath for a response to Saunders’ criticism, but didn’t immediately comment.
Chasing growth opportunities
On a conference call, Tritton highlighted the retailer’s growth opportunities. He said the company plans to open 20 to 25 new BuyBuy Baby stores and remodel 130 to 150 Bed Bath stores this year. With the additional remodeling of the eponymous Banner stores, over 200 locations — or about a quarter of Bed Bath stores — will be remodeled by the end of the fiscal year.
He also pointed to new initiatives, including an agreement with Kroger to sell products on its website and open stores in its grocery stores.
And he said it wants to capitalize on an expected wedding boom this year by encouraging couples to sign up at its stores. He said the company is seeing “an uptick” in wedding and baby registrations.
“We just need to get our inventory in inventory to make that happen,” he said.
In addition to implementing its turnaround efforts, Bed Bath must compete for buyers’ dollars with inflation at about four-decade highs. Consumers are also weighing other spending priorities, like summer vacations and spring wardrobes, that could divert their attention elsewhere.
However, Saunders said higher prices may actually inspire Americans to refocus on home ownership.
“People might say, ‘Well, it’s quite expensive, so we’re going to be spending a little bit more time at home than on vacation, so we’re going to prioritize the garden and the outdoors,'” he said. “All of these things are areas that they have to look at and they have to be very tactical when they say, ‘Where are the growth points?
Tritton conceded in a CNBC interview that the background is more difficult, especially since households no longer have extra dollars from the government, such as child tax credits. Still, he said he was optimistic about the long-term prospects.
“We believe there is an evergreen, strong home market that has had some erratic ups and downs and if it normalizes we think there is a great deal to be made,” he said. “We are part of the lives of our customers and their wants and needs and making sure we stock and serve that need is our most important agenda.”
Read the company’s results press release here.