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Bed Bath & Beyond Inc. stock dropped 22% Thursday, after the company reported fiscal second-quarter results that missed expectations and warned that the problems that plagued the home-goods retailer during the month of August will persist for a chunk of the holiday season.
“In August, the final and largest sales month of Q2, traffic unexpectedly slowed and therefore, sales did not materialized as we had anticipated,” said Chief Executive Mark Tritton on the company’s earnings call, according to a FactSet transcript.
A surge in coronavirus infections and delta fears across Florida, Texas and California, which accounts for 30% of the retailer’s business, took a toll, as did the global supply chain problems that most companies have experienced. The company also said internal missteps hurt results.
“There were opportunities where we should have been more effective in allocating marketing resources to stimulate and support traffic in stores and online,” Tritton said. “And in effort to diversify and shift our customer engagement towards online and social media channels, we overcorrected and bid too far from the core fundamental, historical and current traffic drivers.”
For example, the company cut the number of print circulars it distributes.
“The rapid decline in traffic was particularly detrimental for us given the inclusion and significance of August in our fiscal quarter versus our competitors,” Tritton said.
“The speed of industry inflation and lead time pressures outpaced our plans to offset these headwinds, and as a result, we did not pivot fast enough, especially on price and margin recovery.”
The problems have persisted into September.
“[R]ecovering by November and delivering a strong holiday is our key focus,” Tritton said.
Target Corp.
TGT,
has already announced its holiday kick-off with its Target Deal Days to take place Oct. 10 through Oct. 12.
Bed Bath & Beyond
BBBY,
reported earnings, revenue and comp sales that missed expectations. The company also issued third-quarter earnings guidance that was well below FactSet consensus, and weak full-year guidance.
The company tried to strike a positive note, with a focus on store remodels and two new owned brand launches coming in October and November.
“In our view, launching new private label brands in the midst of elevated ocean container rates, inventory shortfalls and freight congestion is proving a difficult strategy, and we believe inventory availability likely dampens near-term plans,” wrote Wells Fargo in a note.
Moreover, analysts called into question Bed Bath & Beyond’s assertion that there’s “moderating home category growth.”
“Bed Bath & Beyond called out a moderating home furnishing environment that worsened in August, yet public-‘peer’ results and commentary (RH, Williams-Sonoma, etc.) would suggest otherwise,” Wells Fargo said.
Wells Fargo rates Bed Bath & Beyond shares at underweight and halved its price target to $14 from $28.
CFRA also slashed its Bed Bath & Beyond price target by half to $20 and downgraded the stock to hold from buy.
“We think the three-year transformation plan is likely to take longer before we see major uptrend in performance,” Kenneth Leon wrote.
“Bed Bath & Beyond has great potential with over 1,000 super stores, but new private brand categories and customer loyalty need more work.”
Bed Bath & Beyond shares have fallen 2.6% for the year to date while the S&P 500 index
SPX,
has gained 15.6% for the period.
