Bed Bath & Beyond Inc delivers strong gross margin performance in Q3, shares down 12% in premarket

Anthony92931, Bed Bath & Beyond, CC BY-SA 3.0

US-based homeware retailer Bed Bath & Beyond Inc (BBBY) released its FY21 quarter third earnings result on Thursday before the market opened. They reported net sales of $1.8 million and adjusted EPS of $0.08.

In premarket, BBBY shares were down 9.2% to $12.17.

Key Highlights

  • Net Sales of $1,878M; Sequential Comparable Sales Improvement Within the Fiscal Quarter.
  • Company Offsets Higher Freight Costs, While Product Replenishment Delays Pressure Sales Amidst Supply Chain Constraints.
  • GAAP Gross Margin of 35.6%; Adjusted Gross Margin of 35.9% Reflecting Significant Expansion vs. Q3’20 and Q3’19.
  • Announces Further SG&A and Expense Optimization of Approx. $100 Million Annualized.

“During a quarter where our sales momentum was not where we wanted it to be with sales of $1.9 billion and a 7% comp decline, improved momentum in November and strong gross margins demonstrated progress in our transformation. After our previously announced slower start to sales in September and October, we drove a change in trends by November with our comp decline improving, particularly in stores. However, overall sales were pressured despite customer demand due to the lack of availability with replenishment inventory and supply chain stresses that had an estimated $100 million, or mid-single digit, impact on the quarter and an even higher impact in December. Nevertheless, our customer acquisition strategy for the Bed Bath banner is gaining traction as evidenced by our Beyond+ loyalty program, which grew by nearly half a million members after one of our largest new subscriber quarters. Our buybuy BABY banner continues to deliver double-digit growth and we are on track to achieve approximately $1.3 billion in sales in this first year of transformation – ahead of our investor day goals – all while improving profitability and market share.”

Mark Tritton, Bed Bath & Beyond’s President and CEO 

Analysts Estimate

EPS –  $0.02

Revenue –  $2.0 billion

Earnings History

In the second quarter of FY21, the homeware retailer company lost $73.2 million, or 72 cents per share, compared to a year-earlier net income of $217.9 million, or $1.75 per share. Excluding one-time items, the company earned 4 cents per share, less than the 52 cents expected by analysts.

Bed Bath & Beyond’s total net sales fell by 26% to $1.98 billion. Its comparable sales increased by 3% in stores but fell by 9% in digital channels.

Its gross margin was 30.3 percent in the second quarter, while its adjusted gross margin excluding special items was 34.0 percent.

For the quarter, the company’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $85 million, reflecting lower comparable sales and adjusted gross margins.

Analysts Forecasts

Fourteen analysts forecasted a 12-month price for Bed Bath & Beyond Inc with a median target of $16.00, with a high of $34.00 and a low of $12.00. The median estimate represents a +5.68% increase over the previous price of 15.14.

The current consensus among 20 investment analysts is to hold Bed Bath & Beyond Inc. (BBBY)stock.

Future Plans

Bed Bath & Beyond Inc. (NASDAQ: BBBY) announced the launch of its new digital marketplace in November 2021, expanding on the company’s existing authority in essential Home & Baby categories. The marketplace will add key products from a carefully curated list of third-party brand partners, which will be seamlessly integrated into the Bed Bath & Beyond digital platform.

Company Profile

Bed Bath & Beyond Inc. is a domestic merchandise retail store chain based in the United States. The company has many locations in the United States, Canada, Mexico, and Puerto Rico. Bed Bath & Beyond was established in 1971. As of August 28, 2021, Bed Bath & Beyond operated 999 stores under various banners.

In May, the company partnered with technology firm DoorDash to improve its same-day delivery services.

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