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Bed Bath & Beyond (BBBY) Q4 2021 earnings

Bed Bath & Beyond (BBBY) Q4 2021 earnings

Bed Bath and Beyond shares tumbled Wednesday as the home goods retailer reported a quarterly loss, reported a struggle with low inventory and crowded outlets, and warned that consumer demand was slowing.

CEO Mark Tritton said out-of-stock merchandise caused the company to lose about $175 million in sales for the fourth quarter of the fiscal year. That’s up from the previous quarter, when supply chain bottlenecks cost the company about $100 million.

Triton said in an interview with CNBC that the home goods retailer was disappointed with his results. He said “major headwinds in the macro environment” have slowed the company’s turnaround efforts.

For example, he said, it costs more to transport goods, and some of the best-selling items of national brands are in short supply due to the loss of components, such as microchips that go into the blanks. In addition, he said, the majority of his seasonal merchandise stopped at ports and arrived late.

In a phone call following the company’s earnings report, Chief Financial Officer Gustavo Arnal said challenges continued into the first quarter. He said consumers are feeling the increased uncertainty, which is leading to a slump in demand. So far in the first quarter, he said same-store sales are down about 20% — a deeper drop than the previous three months.

Bed Bath did not provide a specific forecast on Wednesday but said it expects sales and margins to improve in the second half of the next fiscal year, as supply chain conditions ease.

Here’s how the retailer fared in the three months to February 26 compared to what analysts had been expecting, based on Refinitiv data:

  • Loss per share: 92 cents vs. 3 cents expected profit
  • Revenue: $2.05 billion vs. $2.07 billion forecast

The company’s net loss grew to $159 million, or $1.79 per share, from net income of $9 million, or 8 cents per share, the previous year. Excluding non-recurring items, it lost 92 cents a share. Analysts polled by Refinitiv expected earnings per share of 3 cents.

Sales fell 22% to $2.05 billion from $2.62 billion a year earlier. This is below estimates of $2.07 billion.

Same-store sales, a key retail metric, are down 12% across the Bed Bath business compared to the same period last year. Same-store sales fell 15% for the Bed Bath & Beyond banner and grew in low single digits for the BuyBuy Baby ad.

Digital sales are down 18% compared to the same period last year, which partly reflects the return to stores and the normalization of e-commerce levels.

bumpy journey

Bed Bath has been on a bumpy ride, as Target veteran Tritton seeks to refresh the retailer’s brand by launching private label products, remodeling stores, and closing underperforming locations. Its stock has pulled into meme stock heights along with AMC Entertainment and GameStop.

As of Tuesday’s close, Bed Bath shares are up about 23% so far this year, well ahead of the retail industry and the broader market. The retailer’s stock closed at $17.97 On Tuesday, it was down 6.75%, bringing its market capitalization to $1.73 billion.

The retailer has also come under pressure from investors — including activist Ryan Cohen, president of GameStop and founder of Chewy.

The retailer recently struck a deal with Cohen’s company, RC Ventures, by agreeing to add new board members and exploring whether it should split up or sell the BuyBuy Baby business, which has been one of its bright spots.

However, Triton said Bed Bath is making progress with his transformation. He said it is investing in technology, welcoming back customers with targeted postcards and emails and expanding its more profitable private-brand business.

He said Bed Bath is overhauling its supply chain so it can better manage all of its merchandise as it imports merchandise and transports it to distribution centers and stores. He said the technology, which works like a “virtual control tower”, will start operating at the end of this month. The company is adding more regional distribution centers on both sides of the country. These efforts are already underway, he said, but are becoming more urgent.

“The timing of these pressures and the timing of completing the strategy is the point of friction,” he said.

Some analysts and retail experts are not convinced.

Neil Saunders, managing director of GlobalData Retail, called the Bed Bath results “an absolute massacre”. He said Bed Bath must reform its operations or risk a further drop in sales.

He also cast doubt on the company, which he blamed for its performance, in part, on geopolitical dynamics — noting that a quarter of it ended just two days after Russia invaded Ukraine.

“These results are so bad, I know they’re trying to pin them down on external factors and I understand why – maybe I’ll do the same,” he said. “But now, next year is really a critical test for them because now they have to prove that the strategy they are implementing has legs and can work in the long run.”

Saunders said the retailer should carve its own identity, rather than copy competitors like Target, and move more quickly to reflect consumers’ moods on its website and with in-store displays. For example, he said, she missed the “comfortable” trend in the early months of the pandemic not to move bedding and other related household goods to the front of the store.

CNBC reached out to Bed Bath to respond to Saunders’ criticism, but did not immediately comment.

Chasing growth opportunities

On an earnings call, Triton emphasized the retailer’s growth opportunities. He said the company plans to open 20 to 25 new BuyBuy Baby stores and remodel 130 to 150 Bed Bath stores this year. With its namesake sign stores remodeled, he said it will redesign more than 200 locations — or roughly a quarter of Bed Bath’s stores — by the end of the fiscal year.

He also cited new initiatives, including a deal with Kroger Inc to sell products on its website and open stores within its grocery stores.

He said she wants to take advantage of the expected wedding boom this year by encouraging couples to sign up at her stores. He said the company was “seeing a slight increase” in subscriptions to registering weddings and children.

“We just need our stock in stock so we can facilitate that,” he said.

Besides implementing transformation efforts, Bed Bath has to compete for shopper dollars, as inflation is at its highest level in nearly four decades. Consumers are also weighing other spending priorities, such as summer vacations and spring wardrobes, which may direct their attention elsewhere.

However, Saunders said the higher prices could actually inspire Americans to focus on home again.

“People might say, ‘Well, it’s kind of expensive, so we’re going to be spending a little bit more time at home than on vacation, so we’re going to prioritize being in the park and going out,'” he said. On saying, “Where are the growth points? And let’s focus on them.”

Triton admitted in an interview with CNBC that the background is more stark, especially since families no longer have extra government dollars like child tax credits. However, he said he is optimistic about the long-term outlook.

“We think there’s a strong local market and it’s always going to see some erratic ups and downs, and when it comes to normal, we think there’s a great job to do,” he said. “We are a part of customers’ lives, wants and needs and making sure we’re in stock and delivering the services you need is our main agenda.”

Read the company’s earnings press release here.

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