Bed Bath & Beyond Stock Tanks on Weak Fiscal Q2 Earnings



Second-quarter performance

Bed Bath & Beyond (BBBY) posted its fiscal second-quarter earnings after the market closed on September 26. For the quarter ended on September 1, the company posted adjusted EPS (earnings per share) of $0.36 on revenues of $2.94 billion against analysts’ EPS expectation of $0.50 and revenue expectation of $2.96 billion. The company’s same-store sales fell 0.6%, while analysts had projected it to rise by 0.3%. The weak fiscal second-quarter results led the company’s stock price to fall by ~14.0% in yesterday’s after-hours trading.

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Year-over-year revenue growth

Year-over-year, BBBY’s revenue remained flat. During the quarter, the company’s SSSG fell due to the decline in the number of transactions at the company’s stores partially offset by an increase in average transaction amount. Thanks to continued investments to enhance its digital capabilities, the customer-facing digital channels posted strong SSSG (same-store sales growth), while the SSSG for the company’s stores declined in the mid-single digits.

Decline in EPS

Year-over-year, BBBY’s adjusted EPS declined by 53.2% from $0.77 in Q2 2017. The decline in revenue and net margins lowered the company’s EPS. However, some of the declines were offset by share repurchases. During the quarter, the company repurchased 2.1 million shares at a cost of ~$41 million.

During the quarter, BBBY’s net margin fell to 1.7% from 3.7% in Q2 2017. The decline in gross margin and an increase in SG&A (selling, general, and administrative) expenses lowered the company’s net margin, which was partially offset by the lower effective tax rate. The company’s effective tax rate was at 24.3% compared to 37.0% in the corresponding quarter of the previous year.


BBBY’s management expects its revenue to rise in the mid-single digits for the fiscal third quarter, while the revenue for the fiscal fourth quarter is expected to decline in the high single digits due to a calendar shift and one less week of operations compared to fiscal 2017. For fiscal 2018, the management forecasts its diluted EPS to be at the lower end of its earlier guidance range of about $2.00.


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