Source: Bed Bath & Beyond
Bed Bath & Beyond reported a double-digit decline in fiscal sales in the fourth quarter on Wednesday, as ongoing store closures and sales that are part of a larger turnaround plan still outweigh the results.
Its shares fell more than 8% in the pre-trading market as some investors expected to find clearer signs of progress.
“There are some positive things, but it’s still gripping,” said Jessica Ramirez, a small research analyst at Jane Hali & Associates. ‘Because they know the street, they want this turnaround pretty quickly. By now, investors want things to get a little better. ‘
The big box retailer confirmed a previous sales outlook for the coming financial year, noting that the positive selling point has increased in the current quarter. Many Americans turned to the company’s stores and websites during the Covid pandemic to buy cleaning supplies, kitchen appliances, bedding, and other items for their homes.
However, the results in the first quarter are going to be confusing, CEO Mark Tritton explained in an interview. During the year ago, all of Bath Bath & Beyond’s stores were closed due to the health crisis, and it was completely dependent on its digital business to supplement sales. This is different from some retailers, especially Walmart and Target, who were able to keep their stores open throughout the pandemic.
“What you see is a bit of turmoil,” Tritton said. “You’re going to see a division in the retail market.”
Here’s how the company performed in the quarter ended February 27, compared to what analysts had expected, using a survey by Refinitiv:
- Earnings per share: 40 cents adjusted to 31 cents expected
- Revenue: $ 2.62 billion versus $ 2.63 billion expected
Bed Bath & Beyond’s net income during the period grew to $ 9.1 million, or 8 cents per share, compared to a loss of $ 65.4 million, or 53 cents per share, a year earlier. With the exception of one-off adjustments, the company earns 40 cents per share, better than the 31 cents expected by analysts polled by Refinitiv.
Net sales fell 16% to $ 2.62 billion from $ 3.11 billion a year earlier. That was slightly less than the $ 2.63 billion analysts had expected.
The company said the year-on-year decline was driven in part by sales of Christmas tree stores and Cost Plus global market businesses, as well as ongoing store closures.
Sales in the same store increased by 4%, the company said. Online sales rose 86% in the fourth quarter, but that was not enough to fully compensate for the reported double-digit cuts in the store. The company noted that 41% of online sales were made through stores.
Within the namesake Bed Bath & Beyond’s business, the biggest growth took place in the home organization, followed by kitchen preparation, interior decor and then bedding. Sales of the same store at the Bed Bath & Beyond banner increased by 6%.
Bed Bath & Beyond reaffirms its fiscal outlook for 2021, which it returned in January, asking sales to be between $ 8 billion and $ 8.2 billion. According to Refinitiv, analysts estimate sales of $ 8.18 billion in 2021.
The current quarter will be affected not only by the closure of stores in the past year, but also by the continued restructuring of the company. Its four core banners are Bed Bath & Beyond, Buybuy Baby, Harmon Face Values and Decorist.
The retailer predicts that net sales will increase by more than 40% year-on-year in the first quarter. Analysts called for a 45.8% jump. However, with the exception of the impact of divested businesses, Bed Bath & Beyond said sales of its four core banners could rise to 65% to 70%.
‘Early days’
Bed Bath & Beyond CEO Mark Tritton
Source: Bed Bath & Beyond
Tritton played a crucial role in his previous concert as chief retailer at Target, helping the big-retailer create excitement among customers around exclusive brands and refurbished stores. Wall Street is still waiting to see if he can achieve the same success at Bed Bath & Beyond.
As part of Tritton’s turnaround plans, Bed Bath & Beyond is rebuilding about 130 to 150 stores this financial year, including 26 renovations during the first quarter. It has just completed its first series in the Houston market in February.
The company said it will spend about $ 250 million over the next three years to grow a total of about 450 Bed Bath & Beyond stores. This involves the removal of corridors and the removal of sky-high merchandise that is often seen in the top shelves, fresh moves are made and modern light installations are installed.
“It’s early days,” Tritton told CNBC about the renovations. “Normally we have a period of adjustment while we go through each cultivation … it’s about a twelve week process.”
Bed Bath & Beyond also strengthens the list of private labels in different categories of home goods. He plans to launch at least eight brands this year, hoping the exclusivity will be enough to drive people to his stores over the competition, which includes Amazon.
Last month, he made the debut of Nestwell, which sells bed and bath items. Haven, a spa-inspired bathroom brand, will be launched next week.
Bed Bath & Beyond said it expects private label sales to grow by 30% of its business within three years, up from around 10% today. The company said these efforts should also increase its profitability.
As the year progressed, Bed Bath & Beyond said it expects successive improvement in profit margins. The hope is that the pressure of increased freight costs, which has affected many retailers through the course of the pandemic, will ease.
“By 2020, our mix of digital stores was huge,” Tritton said. “A digital sale, because of the shipping cost, is always a little different. We’ll see it recalibrate in 2021.”
This year, the company plans to repurchase $ 325 million of its own stock, up from $ 300 million last year. The three-year repurchase authorization has been increased to $ 1 billion, from $ 825 million.
Bed Bath & Beyond shares have risen about 57% so far from Tuesday’s market. The company has a market value of $ 3.4 billion.
Find the full press release from Bed Bath & Beyond here.
—CNBC’s Courtney Reagan contributed to this reporting.