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Why Bed Bath & Beyond Stock Fell in H1 2018

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Stock performance

Bed Bath & Beyond’s (BBBY) stock price fell 45.9% in 2017 and continued its downward momentum in the first half of 2018, falling by 9.4%. Year-to-date, the stock has fallen 3.5% due to lower-than-expected SSSG (same-store sales growth) in the first quarter. As shown in the graph below, the company’s SSSG has been negative for the last five quarters.

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First-quarter performance

In the first quarter, Bed Bath & Beyond posted adjusted EPS of $0.33 on revenue of $2.75 billion, in line with analysts’ expectations. However, the company’s first-quarter SSSG fell 0.6%, missing analysts’ expectation of a 0.1% rise. The company’s SSSG fell due to its number of transactions falling.

Year-over-year, the company’s revenue rose 0.4%, while its EPS fell 43.1%. The company’s revenue was driven by the addition of new stores and offset by its negative SSSG. BBBY’s EPS fell due to net margin contraction offset by revenue growth and share repurchases.

Outlook

In 2018, Bed Bath & Beyond expects its revenue to be flat YoY (year-over-year) or slightly higher than in 2017, which was a 53-week year. It also expects its EPS to fall YoY to the low-to-mid $2 range from $3.12.

Analysts’ recommendations

Of the 22 analysts following Bed Bath & Beyond, 4.5% recommend “buy,” 54.5% recommend “hold,” and 40.9% recommend “sell.” Their average target price of $17.94 implies a 15.5% fall over the next 12 months.

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