Bed Bath & Beyond slips to loss in Q4 but beats estimates

Bed Bath & Beyond (NASDAQ: BBBY) slipped to a loss in the fourth quarter from a profit last year, due to non-cash goodwill and tradename impairments charge. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates.

Net loss was $253.8 million or $1.92 per share compared to a profit of $194 million or $1.41 per share in the previous year quarter. Adjusted earnings for the latest quarter were $158.8 million or $1.20 per share.

Net sales declined by 11% to $3.31 billion, primarily due to one less week in the quarter compared to fourteen weeks in fiscal 2017 and a shift in the calendar, moving the post-Thanksgiving holiday sales week out of the fourth quarter. Comparable store sales dropped 1.4% and included strong sales growth from the company’s customer-facing digital channels and sales from stores that declined in the mid-single-digit percentage range.

Looking ahead into fiscal 2019, the company expects earnings to grow slightly and to be in the range of $2.06 to $2.15 per share. This included about $0.05 per share in severance and shareholder activity fees, expected to be incurred in the first quarter. Excluding these expenses expected to be incurred in the first quarter, earnings are anticipated to be in the range of $2.11 to $2.20 per share.

In 2020 and long term, incorporating the cumulative effects of its comprehensive transformation plan, its capital allocation strategy, and operating margin improvement of over 300 basis points, the company expects to achieve double-digit growth rates in EPS.

The company’s board of directors declared an increase in the quarterly dividend to $0.17 per share from $0.16 per share. The dividend is payable on July 16, 2019, to shareholders of record on June 14, 2019. During the fourth quarter, the company repurchased about $78 million of its common stock, representing about 5.2 million shares.

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The company also provided an update on its comprehensive transformation plan, including short-and-long-term financial targets. The company’s ongoing efforts to implement and execute on organization-wide foundational initiatives are intended to drive four key objectives. This includes mid-and-long-term revenue growth, gross margin improvements, SG&A improvements, as well as current and sustainable world-class operational support.

In addition, the board of directors has been undertaking a comprehensive review of its composition, governance structure, and compensation practices. The board has named Patrick Gaston as Lead Independent Director and has reconstituted its Nominating and Corporate Governance Committee. Also, the board is accelerating its refreshment program, which has already resulted in the addition of three new directors in the past two years.

Shares of Bed Bath & Beyond ended Wednesday’s regular session up 5.09% at $19.41 on the Nasdaq. Following the earnings release, the stock inched down over 5% in the after-market session.

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