On Thursday, Bed Bath & Beyond Inc (NASDAQ: BBBY) saw its shares tank upon its second-quarter report. Supply chain disruptions harmed sales whereas inflation ate into profits with the retailer slashing both revenue and earnings outlook for the full year as a brighter outlook was also missing from its third quarter guidance. In a nutshell, BBB took a step back after making good progress in its previous quarter.
Second-Quarter Figures
In the quarter that ended on August 28th, Bed Bath and Beyond generated $1.99 billion in revenue which is 26% less than $2.69 billion it sold a year ago. The figure also came below the estimate of $2.06 billion. The retailer ended up losing $73.2 million, or 72 cents per share. Only one year ago, it earned a net income of $217.9 million, or $1.75 per share. Putting one-time items aside, it did earn 4 cents a share, but this is still significantly less than the 52 cents Wall Street analysts expected, according to a Refinitiv survey.
The Delta variant spoiled the ‘back-to-school’ fun
In its previous quarter, it appeared that the company’s efforts of remodeling its stores and launching in-house brands for everything, from towels to cooking utensils, were working as the momentum was clearly being built. But, as COVID-19 fears triggered by the delta variant emerged over summer, this progress stalled.
As a result, not as many shoppers appeared as expected for ‘back-to-school’ shopping. The upcoming reports from Target Corporation (NYSE: TGT), Walmart Inc (NYSE: WMT), and Kohl’s Corporation (NYSE: KSS) will tell if BBB’s rivals also ended up in trouble. On Thursday, Kohl’s shares were down almost 8% with other retail stocks, including department store chains Nordstrom (NYSE: JWN) and Macy’s Inc (NYSE: M) were also trading lower.
Guidance
Third-quarter adjusted earnings are expected to be between breakeven and 5 cents per share, with sales expected in the range between $1.96 billion to $2 billion, both below analyst expectations. As for the full year, expectations have also been lowered due to persisting issues such as supply chain complications. Adjusted earnings are expected to fall in the range between 70 cents and $1.10 per share with revenue in the range between $8.1 billion and $8.3 billion.
Outlook
Wells Fargo retail analyst Zachary Fadem finds that these underwhelming results “undeniably cast doubt” on Bed Bath & Beyond’s ability to deliver on its multi-year turnaround roadmap whereas Chief Executive Mark Tritton remains confident in the company’s long-term transformation despite the second quarter hiccups.
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