Source: Bed Bath & Beyond
Bed Bath & Beyond reported a double-digit decline in fiscal fourth quarter sales on Wednesday as ongoing store closures and divestments, which are part of a larger turnaround plan, continue to weigh on results.
Their shares fell around 1% in premarket trading.
The big box retailer reiterated its previous sales outlook for the coming fiscal year, noting that positive sales momentum had an impact on the current quarter. Many Americans turned to the company’s stores and website during the Covid pandemic to buy cleaning supplies, kitchen appliances, linens, and other items for their homes.
However, Q1 results will be chaotic, CEO Mark Tritton said in an interview. During the same period last year, all of Bed Bath & Beyond’s stores were closed due to the health crisis, and the company relied entirely on its digital business to drive sales. This is unlike some retailers, particularly Walmart and Target, who were able to keep their stores open during the pandemic.
“What you see is some turbulence,” said Tritton. “You will see a fork in retail.”
Here’s how the company performed in the quarter ended February 27, compared to analyst expectations based on a survey by Refinitiv:
- Earnings per share: 40 cents adjusted compared to 31 cents expected
- Revenue: $ 2.62 billion versus $ 2.63 billion expected
Bed Bath & Beyond net income rose to $ 9.1 million, or 8 cents per share, for the period, compared to a loss of $ 65.4 million, or 53 cents per share, last year. Without one-off adjustments, the company earned 40 cents per share, better than the 31 cents expected by analysts surveyed by Refinitiv.
Net sales decreased 16% from $ 3.11 billion a year ago to $ 2.62 billion. That was a little less than the $ 2.63 billion analysts were expecting.
The company said the year-over-year decline was partly due to the sale of its Christmas Tree Shops and Cost Plus World Market businesses, as well as ongoing store closings.
Sales in the same store rose 4%, the company said. Online sales rose 86% in the fourth quarter, but that wasn’t enough to fully offset the reported double-digit decline in in-store traffic. The company found that 41% of online sales came from stores.
Bed Bath & Beyond reiterated its fiscal 2021 sales outlook, which is expected to have sales between $ 8 billion and $ 8.2 billion. According to Refinitiv, analysts estimated sales in 2021 to be $ 8.18 billion.
The current quarter is influenced not only by store closings in the same period last year, but also by the ongoing restructuring of the company. The four main banners are Bed Bath & Beyond, Buybuy Baby, Harmon Face Values and Decorist.
The retailer is forecasting sales growth of more than 40% year over year for the first quarter. Analysts had called for a jump of 45.8%. However, excluding the impact of divested businesses, Bed Bath & Beyond said sales with its four core banners could increase from 65% to 70%.
‘Start time’
Mark Tritton, CEO of Bed Bath & Beyond
Source: Bed Bath & Beyond
Tritton was instrumental in helping the big box retailer attract customers to exclusive brands and refurbished stores on his previous appearance as Chief Retailer at Target. Wall Street is still waiting to see if he can achieve the same success at Bed Bath & Beyond.
As part of Tritton’s turnaround plans, Bed Bath & Beyond is currently converting around 130 to 150 stores this fiscal year, including 26 conversions in the first quarter. It just finished its first batch in the Houston market in February.
The company announced that it will spend around $ 250 million over the next three years to remodel a total of around 450 Bed Bath & Beyond stores. This involves unloading the aisles, removing sky-high stacks of goods that can often be seen on top shelves, adding new signage, and installing more modern lighting fixtures.
“It’s still early,” Tritton told CNBC about the conversions. “Usually we have an adjustment phase as we go through each remodeling … it’s a 12 week process.”
Bed Bath & Beyond is also expanding its list of private labels in various categories of housewares. There are plans to launch at least eight brands this year in the hopes that the exclusivity will be enough to pull people into stores over the competition, which includes Amazon.
Last month, Nestwell was introduced, which sells bed and bath products. Haven, a spa-inspired swim brand, is set to launch next week.
Bed Bath & Beyond predicts that private label sales will account for 30% of its business within three years, up from around 10% today. The company said these efforts should also help increase profitability.
Bed Bath & Beyond expects profit margins to improve sequentially over the course of the year. Hopefully, the pressure will ease from increased freight costs, which have affected many retailers as the pandemic progressed.
“In 2020, our mix of digital-to-stores was oversized,” said Tritton. “A digital sale is always a little different because of shipping costs. We’ll see this recalibration happen in 2021.”
This year the company plans to buy back $ 325 million of its own shares, up from $ 300 million last year. The three-year repurchase authorization was increased from $ 825 million to $ 1 billion.
Bed Bath & Beyond’s shares are up about 57% since the start of the year. The company has a market capitalization of $ 3.4 billion.
The full press release on Bed Bath & Beyond earnings can be found here.
– CNBC’s Courtney Reagan contributed to this coverage.