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Bed Bath & Beyond’s Stock Rose on Optimistic Outlook

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Third-quarter performance

Bed Bath & Beyond (BBBY) posted its third-quarter earnings of fiscal 2018 after the market closed on January 9. For the quarter ended on December 1, the company posted adjusted EPS of $0.18 on revenues of $3.03 billion. Year-over-year, the company’s revenue increased by 2.6%, while its adjusted EPS declined by 59.1%.

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Stock performance

During the quarter, Bed Bath & Beyond outperformed analysts’ EPS expectation of $0.17 but fell short of revenue expectations of $3.04 billion. The company’s SSSG declined by 1.8% during the quarter, while analysts were expecting the company’s SSSG to fall by 0.3%. Although BBBY failed to meet analysts’ sales estimates, the company’s stock price rose 16.8% in the aftermarket trading hours on January 9 due to optimistic 2019 EPS guidance provided by the company’s management.

During the earnings call, BBBY’s management stated that it’s ahead of the scheduled plan in achieving its long-term financial goals, and expects the company’s EPS for 2019 to be around $2.0, which was higher than analysts’ expectations. Analysts had forecasted BBBY’s EPS to decline by 21% in fiscal 2019. The higher-than-expected 2019 EPS guidance appears to have increased investors’ confidence, leading to a rise in BBBY’s stock price.

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Year-to-date stock performance

Last year was tough for BBBY with its stock price losing 48.5% of its value. However, the company has started 2019 on a strong note. As of December 9, the company’s stock has returned 8.3% since the beginning of 2019. During the same period, peers Williams-Sonoma (WSM) and RH (RH) have returned 6.1% and 9.6%, respectively. The SPDR S&P Homebuilders ETF (XHB), which has invested ~21% of its holdings in home improvement and furnishing companies, has returned 8.9% YTD.

Series overview

In this series, we’ll look at BBBY’s performance in the third quarter of fiscal 2018 and compare it with analysts’ expectations. We’ll also cover management’s guidance for fiscal 2018 and fiscal 2019. Let’s start by looking at BBBY’s third-quarter revenue.

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