Shares of Bed Bath & Beyond (NASDAQ: BBBY) were up on Friday, a day after the company delivered disappointing results for the second quarter of 2022. The company reported a wider-than-expected adjusted loss per share along with revenue that fell short of projections. The quarterly performance has created a bearish sentiment around the stock which is already down 57% year-to-date. Here’s a look at what the company has planned for this fiscal year:
Revenue and profitability
BBBY’s net sales decreased 28% year-over-year to $1.44 billion in Q2, missing expectations. Comparable sales declined 26%. Comp sales were down 28% in stores and 22% in digital. Comp sales for the Bed Bath & Beyond banner decreased 28% reflecting legacy merchandise assortment, out of stocks, and continued trends in customer traffic. Comp sales for the buybuy BABY banner decreased in the high teens during the quarter compared to a high-teens percentage growth in the prior-year quarter.
On a GAAP basis, the company delivered net loss of $4.59 per share in Q2. Adjusted net loss was $3.22 per share, which missed analysts’ estimates. Adjusted gross margin was 27.7%, which included a negative impact of 260 basis points from accelerated clearance activity. It also included an impact of 100 basis points from supply chain-related port fees, which is not expected to continue beyond FY2022.
For fiscal year 2022, BBBY expects comparable sales to decline in the 20% range, driven by improvements in the second half of 2022 versus the first half. The trends that the company has been seeing thus far in the third quarter are similar to the second quarter and reflective of its ongoing management of legacy inventory.
SG&A expenses decreased by around 3% YoY to $634.8 million helped by cost reductions and lower rent and occupancy expenses on a lower store base. The company cut its force across corporate and supply chain by 20% and also reduced its indirect spending across the organization.
BBBY is rightsizing its cost structure and store fleet to drive savings of approx. $250 million this year. As part of these efforts, the company is planning to close 150 of its underperforming Bed Bath & Beyond banner stores. BBBY expects to close a minimum of 100 stores by the end of this year. The company estimates adjusted SG&A expense in FY2022 to be approx. $250 million below last year, reflecting cost optimization actions in the second half of the year.
Capex and Cash flow
BBBY now expects Capex for FY2022 to be approx. $250 million versus its original plan of approx. $400 million. The company has paused its new store and remodel programs for the rest of the year which is expected to lower Capex by around $150 million. Working capital management, the reduction in Capex and future store closures are expected to help the company deliver breakeven operating cash flow by the end of FY2022.
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