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Bed Bath & Beyond (BBBY): Here are the things to consider before investing

In an effort to achieve sustainable long-term growth, the company is all set to launch strategic new own brands

While most retailers took advantage of the COVID-driven shopping boom over the past several moths, some missed the bus. Bed Bath & Beyond Inc. (NASDAQ: BBBY) is one of the department store chains that suffered due to widespread store closures. Though the company’s bottom-line performance improved since the early weeks of the virus outbreak, it is yet to return to the pre-crisis levels.

The New Jersey-based home-furnishing retailer has enhanced its e-commerce capabilities, but the dismal in-store sales continue to be a drag on the top line. After slipping to the single-digit territory early last year, shares of Bed Bath & Beyond regained a part of the lost momentum since then, but remained volatile.

Investing in BBBY

Going by the current trend, the stock is unlikely to stabilize in the foreseeable future, even as experts predict a double-digit decline in value. In short, this is not a good time to invest in BBBY’s stock, neither to sell it.  

Read management/analysts’ comments on BBBY’s Q4 results

The company has been going through a rough patch for quite some time and things failed to improve meaningfully even after the appointment of former Target Corp. (NYSE: TGT) veteran Mark Tritton as chief executive officer in 2019. Meanwhile, the efforts to streamline operations by divesting underperforming divisions like Linen Holdings and Cost Plus World seem to have misfired, since it was done during the pandemic.

Revival Plan

Nevertheless, the management expects its revival plan to pay off in the long term, with sales getting a boost from the revised merchandise strategy, improved e-commerce capabilities as well as new features like same-day delivery. Also, the company is busy rolling out private label brands in an effort to lure customers. The post-COVID prospects of the retailer would depend on how effectively it combines the in-store business and e-commerce platform.

Our recovery is real and shows the strength of our own efforts and output rather than reliance on outside factors such as stimulus spend. We know this, because by and large the demographic of our core customer base is not eligible to stimulus benefits. In addition, data shows the stimulus spend is primarily occurring in categories such as food, technology, and apparel, which are not core offerings for us. Our current momentum fortifies our customer-inspired data-driven approach as we re-establish authority in our core home, baby, and beauty wellness markets.

Mark Tritton, chief executive officer of Bed Bath & Beyond

Ends FY20 on Mixed Note

In the fourth quarter, sales dipped to $2.62 billion from $3.1 billion a year ago, hurt by store closures and the sale of certain assets. Same-store sales were up 4%. Meanwhile, lower operating expenses and improved margin performance helped the company turn to profit from last year’s loss, on an adjusted basis. While earnings topped expectations, revenues missed.

Target Corp. Q1 Earnings: Key financials and quarterly highlights

The company will be releasing its first-quarter results on July 14 before the opening bell, amid expectations for continued bottom-line recovery and double-digit sales growth. Currently, the stock is hovering well above its 52-week average and near the multi-year highs seen in January. It traded slightly higher early Thursday, after opening the session at $34.29.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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