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Topline
Shares of brick-and-mortar retailer Bed Bath & Beyond plummeted Wednesday after the firm reported an unexpected loss and acknowledged more vulnerabilities in its business than it had previously accounted for—extending a week-long decline spurred by waning investor sentiment and pessimism over the firm’s ability to turn around its ailing business.
“Retail investors are looking for a short squeeze,” but Bed Bath & Beyond stock is already … [+] “disconnected from reality,” says one Bank of America analyst. © 2021 Bloomberg Finance LP
Key Facts
Down an eighth-straight day, Bed Bath & Beyond stock plummeted as much as 12% Wednesday morning after the company reported a loss of $159 million in the fourth quarter, or 92 cents per share, compared to expected earnings of 13 cents per share; sales of about $2.1 billion, down 22% year over year, also fell short of analyst expectations.
In a statement, CEO Mark Tritton blamed the disappointing results on macroeconomic factors including global supply chain disruptions, the omicron variant of Covid-19 and the “geopolitical turbulence weighing on consumer confidence,” which altogether “uncovered more vulnerabilities than we could have foreseen.”
Though the firm expects sales will improve in the second half of the year, it didn’t provide specific sales guidance for the period.
“Bed Bath & Beyond’s [earnings]
disaster represents the latest question mark around the consumer,” analyst Adam Crisafulli of Vital Knowledge Media wrote in a Wednesday email, pointing out the results follow a similarly disappointing report from Carmax, which blamed the same macroeconomic factors for its worse-than-expected earnings on Tuesday.
On Tuesday, Bank of America analyst Jason Haas warned “reality is about to hit hard for starry-eyed Bed Bath & Beyond shareholders,” giving the stock an underperform rating and issuing a price target of $9.50, representing more than 50% downside.
The company’s turnaround strategy, which included store closures and launching new private-label brands, “has not worked,” Haas said, saying management “moved too quickly” and drove away consumers—forcing the chain to double down on sharp promotions to recuperate sales, including 20% off entire orders, free same-day shipping and $10 gift cards for $50 spent.
Chief Critic
“Bed Bath & Beyond stock has disconnected from its fair value following the involvement of Chewy co-founder, Ryan Cohen, who has developed a retail investor cult-following given his position in GameStop,” Haas said Tuesday. Though retail investors are “looking for a short squeeze” following the sale of the company’s private baby-focused brand BuyBuyBaby, Bank of America values the brand at just over $500 million—far less than the “several billion” Cohen has stated.
Key Background
Bed Bath & Beyond’s disappointing earnings results come about a month after Cohen sent the firm a letter in which he disclosed a 9.8% stake (becoming one of Bed Bath & Beyond’s top five shareholders), blasted management for “disappointing shareholder returns and perpetual underperformance” over the past ten years and laid out suggestions to help spur stock growth. Late last month, Cohen tapped three corporate restructuring veterans to join Bed Bath & Beyond’s board. Shares of the retailer—a highly shorted stock caught up in last year’s retail-fueled meme-stock mania—skyrocketed as much as 110% after Cohen’s letter was disclosed but have since plummeted about 62%.
Further Reading
Bed Bath & Beyond Stock Rises After New Agreement With GameStop Billionaire Cohen (Forbes)
Financial Services
