Bed Bath & Beyond (BBBY) Q4 2021 Results
Shares of Bed Bath and Beyond fell on Wednesday as the home goods retailer reported a loss in the holiday quarter, spoke of struggles with low inventory and congested ports, and warned that demand consumers was slowing down.
CEO Mark Tritton said out-of-stock merchandise caused the company to lose about $175 million in sales in the fiscal fourth quarter. That’s more than the previous quarter, when supply chain bottlenecks cost the company about $100 million.
Tritton said in an interview with CNBC that the home goods retailer was disappointed with its results. He said “major headwinds in the macro environment” have slowed the company’s turnaround efforts.
For example, he said, shipping goods costs more and some top-selling national brand items are in short supply due to missing components, such as microchips that go into vacuum cleaners. Additionally, he said, the majority of his seasonal goods have been stuck in ports and arriving late.
In a conference call following the company’s earnings report, Chief Financial Officer Gustavo Arnal said the challenges continued into the first quarter. He said consumers are feeling growing uncertainty, which is causing demand to decline. So far in the first quarter, he said same-store sales were down about 20%, a steeper decline 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 coming fiscal year as supply chain conditions improve. improve.
Here’s how the retailer fared in the three months to February 26 compared to what analysts expected, based on data from Refinitiv:
- Loss per share: 92 cents against an expected profit of 3 cents
- Revenue: $2.05 billion vs. $2.07 billion expected
The company’s net loss rose to $159 million, or $1.79 per share, from net income of $9 million, or 8 cents per share, a year earlier. Excluding one-time items, it lost 92 cents per share. Analysts polled by Refinitiv had 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, fell 12% across Bed Bath’s business compared to the prior year period. Same-store sales decreased 15% for the Bed Bath & Beyond banner and grew by less than 10% for the BuyBuy Baby banner.
Digital sales were down 18% from the prior year period, partly reflecting the return to stores and the normalization of e-commerce levels.
A bumpy ride
Bed Bath has had a bumpy ride, as Target veteran Tritton has sought to refresh the retailer’s brand with the launch of private label products, store renovations and the closure of underperforming locations. His stock has been drawn into meme-stock rallies with AMC Entertainment and GameStop.
As of Tuesday’s close, shares of Bed Bath had risen around 23% so far this year, well ahead of the retail sector and the broader market. The retailer’s stock closed at $17.97 Tuesday, down 6.75%, bringing its market value 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 reached an agreement with Cohen’s company, RC Ventures, agreeing to add new board members and explore whether it should spin off or sell its company BuyBuy Baby, which was l one of its strengths.
Still, Tritton said Bed Bath is making progress in its transformation. He said he’s investing in technology, welcoming customers back with targeted postcards and emails, and growing his private label business more profitable.
He said Bed Bath is doing a complete overhaul of its supply chain to better manage all of its merchandise as it imports goods and gets them to distribution centers and stores. He said the technology, which acts as “a virtual control tower”, will go live at the end of this month. The company is adding other regional distribution centers on both sides of the country. These efforts were already underway, but have become more urgent, he said.
“The timing of those pressures and the timing of the completion of the strategy is the sticking point,” he said.
Some analysts and retail experts are not convinced.
Neil Saunders, managing director of GlobalData Retail, called Bed Bath’s results “absolute carnage”. He said Bed Bath had to fix its operations or risk sales falling further.
He also cast doubt on the company attributing its performance, in part, to geopolitical dynamics – noting that its quarter ended just two days after Russia invaded Ukraine.
“These results are very, very bad, and I know they are trying to attribute it to external factors and I understand why – I would probably do the same thing,” he said. “But now the year ahead is really a litmus test for them because now they have to prove that the strategy they are putting in place has legs and can work in the long term.”
Saunders said the retailer needs to carve out its own identity, rather than copy competitors such as Target, and move more quickly to reflect consumer moods on its website and with in-store displays. For example, he said, he missed the “comfortable” trend of the early months of the pandemic by not moving bedding and other related household items to the front of the store.
CNBC reached out to Bed Bath for a response to Saunders’ criticism, but he did not immediately comment.
Looking for growth opportunities
On an earnings call, Tritton highlighted the retailer’s growth opportunities. He said the company plans to open 20 to 25 new BuyBuy Baby stores and revamp 130 to 150 Bed Bath stores this year. Along with additional renovations to its namesake banner stores, it said it will have remodeled more than 200 locations – about a quarter of its Bed Bath stores – by the end of the fiscal year.
He also discussed new initiatives, including an agreement with Kroger to sell products on its website and to open stores inside its grocery stores.
And he said he wanted to take advantage of the marriage boom expected this year by encouraging couples to register at his stores. He said the company was “seeing a slight increase” in marriage and baby registry registrations.
“We just need to put our inventory in stock so we can facilitate that,” he said.
In addition to executing its turnaround efforts, Bed Bath must compete for buyers’ money, as inflation is at its highest level in about four decades. Consumers are also evaluating other spending priorities, such as summer vacations and spring wardrobes, that might direct their attention elsewhere.
Saunders, however, said higher prices may actually cause Americans to focus on the home again.
“People can say, ‘Well, it’s a little expensive, so we’re going to spend a little more time at home rather than on vacation, so we’ll prioritize the garden and the outdoors'” , did he declare. “All of those things are areas that they have to look at and they have to be very tactical in saying, ‘Where are the growth points? And pivot to those. “”
Tritton acknowledged in an interview with CNBC that the context is more difficult, especially since households no longer receive additional money from the government, such as child tax credits. Still, he said he was optimistic about the long-term prospects.
“We believe there is a strong and persistent domestic market that has seen erratic ups and downs and when it normalizes we believe there is good business to be had,” he said. “We are part of customers’ lives, their wants and needs and making sure we are in stock and meeting that need is our primary focus.”
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