Bed Bath & Beyond (NASDAQ:BBBY) stock fell 17.3% on April 15 following news of a historic decline in US retail sales. However, the stock has risen 20.6% as of 11:06 AM ET today. The company’s fourth-quarter earnings beat Wall Street’s expectations. The company reported its results for the fourth quarter of fiscal 2019 and fiscal 2019 after the markets closed on April 15. Notably, the fourth quarter ended on February 29.
The company’s fiscal fourth quarter ended before the closure of its stores offering non-essentials effective March 23 due to coronavirus. Meanwhile, stores offering essentials, including the buybuy Baby stores and Harmon Face Values, are operating with limited hours. The company initially announced the temporary closure of its retail stores till April 3. However, the closure has been extended until at least May 2.
Bed Bath & Beyond’s fourth-quarter adjusted EPS was $0.38, which was way above analysts’ estimate of $0.20.
Bed Bath & Beyond’s Q1 earnings
The company’s earnings beat analysts’ expectations but declined YoY (year-over-year). Bed Bath & Beyond’s adjusted EPS of $0.38 in the fourth quarter of fiscal 2019 fell significantly compared to $1.20 in the fourth quarter of fiscal 2018. Lower sales and weak margins hurt the bottom line. The company’s gross margin contracted by about 210 basis points YoY to 32.6%. The lower merchandise margin due to promotional activity and markdowns hurt the gross margin. Bed Bath & Beyond’s gross margin was also impacted by higher shipping expenses associated with increased digital sales.
Higher SG&A expenses dragged the earnings down. The company incurred consulting expenses associated with efforts to accelerate its transformation initiatives and higher advertising expenses.
Bed Bath & Beyond’s fourth-quarter sales declined 6.1% YoY to $3.11 billion but beat analysts’ forecast of $3.07 billion. The company’s comparable-store sales fell by 5.6% in the quarter. Meanwhile, comparable sales from the company’s physical stores fell by 10%. In contrast, the comparable sales from the company’s digital sales grew by about 16%.
Bed Bath & Beyond’s stores have been experiencing intense competition from online retailers like Amazon and big players like Walmart (NYSE:WMT) and Target (NYSE:TGT). These companies have been gaining customers with attractive merchandise offerings and better shopping experiences.
Challenging times ahead
Bed Bath & Beyond didn’t issue any guidance for fiscal 2020 due to COVID-19. Amid the outbreak, the company postponed its share buyback, dividend, and debt reduction plans. The company also announced a 30% temporary reduction in the executive team’s salaries including president and CEO Mark Tritton.
Meanwhile, Bed Bath & Beyond is going ahead with $250 million of capital expenditures to drive its key strategic plans. The plans include investments in its digital business and the buy online pick up in-store facility. However, the company has deferred $150 million of its other planned capital expenditures, which included initiatives like store remodels and new store openings.
Last year, Bed Bath & Beyond was under tremendous pressure from activist investors. The company didn’t adapt to the rapidly evolving retail landscape. The pressure from activist investors pressure led to CEO Steven Temares’s departure and a shake-up of the board of directors. In October 2019, the company appointed Mark Tritton as the new CEO. Previously, Tritton served as Target’s chief merchandising officer. Tritton removed six members of the company’s executive team within two months of assuming the new role.
Bed Bath & Beyond has been selling non-core brands, enhancing its stores, and investing in digital channels to improve its prospects. However, the coronavirus pandemic will likely impact the company’s fiscal 2020 results. As of April 15, the stock has fallen 74.3% year-to-date.