The pressure on margin, mainly due to high expenses and weak store performance, is estimated to have affected earnings in the to-be-reported quarter. The management has long been under fire from activist investors for its failure to bring in innovation and stay competitive in the market. The standoff, combined with negative rating actions by leading brokerages, has dampened investor sentiment further.
The pressure on margin, mainly due to high expenses, is estimated to have affected earnings in the to-be-reported quarter
Considering the unfavorable conditions, market watchers predict a 75% year-over-year fall in first-quarter earnings to $0.08 per share, on revenues of $2.58 billion, which is down 6.3% from the year-ago period. While margins are expected to improve slightly from the previous quarter’s levels, higher operating costs and the deterioration in comparable store performance remain a cause for worry.
Having said that, the bullish outlook for the home furnishing market, in the wake of the renewed economic momentum and the uptick in consumer spending, will have a positive impact on Bed Bath & Beyond, going forward. In order to tap those benefits, special attention should be given on innovation and enhancing efficiency.
The management has the daunting task of ramping up the e-commerce platform to match the competitors, which is inevitable to turn the business around in a meaningful way. Efforts should also be made to identify non-profitable stores and close/remodel them.
Though the stock recovered from the multi-year lows seen towards the end of last year, it pared the gains in the last few months and is currently trading just above $10.