Categories AlphaGraphs, Analysis, Earnings, Retail

Bed Bath & Beyond headed for a weak Q1 as margin, comps remain stressed

Bed Bath & Beyond (Nasdaq: BBBY) is one of the worst-performing Wall Street stocks, which has been on a losing streak for several years. Over the past two years, the company’s comparable store sales have remained in the negative territory, weighing down on the overall top-line performance.

The home furnishing retailer is scheduled to publish its first-quarter results on July 10 after the market’s close. Things went from bad to worse after the company provided below-consensus guidance while reporting the fourth-quarter results, sending the stock to a tailspin. Though fourth-quarter earnings of $1.20 per share came in slightly above estimates, sales dipped 11% to $3.3 billion.

Bed Bath & Beyond (BBBY) Comp Sales - Q4 2018 earnings preview

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.

Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips

Most Popular

United Parcel Service (UPS) seems on track to regain lost strength

Cargo giant United Parcel Service, Inc. (NYSE: UPS) ended fiscal 2023 on a weak note, reporting lower revenues and profit for the fourth quarter. The company experienced a slowdown post-pandemic

IPO Alert: What to look for when Boundless Bio goes public

Boundless Bio is preparing to debut on the Nasdaq stock market this week, and become the latest addition to the list of biotech firms that have launched IPOs this year.

Nike (NKE) bets on innovation and partnerships to return to high growth

Sneaker giant Nike, Inc. (NYSE: NKE) has been going through a rough patch for some time, with sales coming under pressure from weak demand and rising competition. Post-pandemic, the company

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top