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Bed Bath & Beyond Inc. reported better-than-expected sales and earnings in fourth-quarter fiscal 2019. However, both top and bottom lines declined on a year-over-year basis.
Results were hurt by soft store traffic, higher promotions and headwinds related to inventory management during the holiday season. Increased clearance activities also dented the quarterly results. That said, the company is progressing well with its inventory reduction program and has already reduced half of its inventory. Moreover, it expects to lower the remaining inventory by fiscal 2020.
Additionally, the company is facing business disruptions, given the uncertainty related to the COVID-19 outbreak. To this end, it has suspended its store remodeling plans and anticipates adverse impacts on its first-quarter and fiscal 2020 results. Consequently, it refrained from providing any guidance for fiscal 2020.
Overall, this Zacks Rank #3 (Hold) stock has plummeted 71.2% in the past three months compared with the industry’s 26.1% decline.
Q4 in Detail
Bed Bath & Beyond reported adjusted earnings of 38 cents per share for the fiscal fourth quarter, down 86.3% from $1.2 in the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate for earnings of 21 cents.
Net sales fell 6.1% to $3,107 million but exceeded the Zacks Consensus Estimate of $3,092 million. Although the solid performance during Cyber Monday contributed to the quarterly results, the downside was caused by comparable sales (comps) decline of 5.6%. Comps decreased due to a high-single-digit decline in transactions, somewhat offset by a low-single-digit increase in the average transaction amount.
Adjusting for the calendar shift, including Cyber Monday weeks, comps fell 11% in the reported quarter. The decline resulted from a loss of 13.6% in store sales, somewhat offset by a rise of 1.1% in digital sales.
Further, gross profit declined nearly 11.6% to $1,013.7 million in the reported quarter. Also, adjusted gross margin contracted 210 basis points (bps) to 32.6%, mainly driven by lower merchandise margins on increased promotional activity and higher markdowns.
SG&A expenses advanced 10% to $1,027 million, driven by gains from the company’s cost structure and optimization efforts. As a percentage of net sales, adjusted SG&A increased 250 bps to 30.7%, mainly owing to 100 bps of consulting expenses related to the ongoing transformation initiatives, review of assets and rise in advertising costs.
Further, the company incurred an operating loss of $81.2 million as compared to $296.7 million in the year-ago quarter.
Financial Position
Bed Bath & Beyond ended fiscal 2019 with cash and investments of roughly $1.4 billion. Long-term debt totaled $1,488.4 million and total shareholders' equity was $1,764.9 million, as of Feb 29, 2020.
In fiscal 2019, the company generated cash flow of about $590.9 million from operating activities and deployed nearly $277 million toward capital expenditures. However, the company has deferred $150 million of planned non-essential capital expenditure in light of the ongoing COVID-19 pandemic.
In the reported quarter, Bed Bath & Beyond did not repurchase any share. Further, it has suspended plans to utilize up to $600 million for lowering debt, share repurchases and dividends.
Store Update
In fourth-quarter fiscal 2019, Bed Bath & Beyond inaugurated two buybuy BABY stores and closed 26 outlets, including five namesake stores, 17 Cost Plus World Market stores, two buybuy BABY stores and two Harmon Face Values stores.
As of Feb 29, the company had 1,500 stores in operation, comprising 976 namesake stores across 50 states, the District of Columbia, Puerto Rico and Canada; 261 stores under the labels World Market, Cost Plus World Market or Cost Plus; 126 buybuy BABY stores; 81 stores under the labels Christmas Tree Shops, Christmas Tree Shops and That! or and That!; 53 stores under Harmon, Harmon Face Values or Face Values names; and three stores under the label One Kings Lane. Additionally, the company’s joint venture operates 10 flagship stores in Mexico.
Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise
In response to the COVID-19 pandemic, the company extended store closures across the United States and Canada at least until May 2. Moreover, it is cutting on costs by furloughing the majority of employees in stores and some corporate associates until up to May 2. Further, the company is temporarily reducing salaries for its executive team by 30%. Meanwhile, the chairman of the board and independent directors will also give up 30% of their quarterly cash compensations.
Among other actions, it has drawn down the remaining $236 million from its revolving credit facility. It is also reducing expenses by lowering inventory levels and extending payment terms for goods and services. Further, the company has decided to cut down on discretionary expenses, including travel, advertising and store maintenance.
However, the company’s four e-commerce fulfillment centers remain operational. In a bid to expedite the delivery process and assign orders locally, it is on track to convert roughly 25% of Bed Bath & Beyond and buybuy BABY stores in the United States and Canada into regional fulfillment centers. Also, the company launched a curbside pickup facility on Apr 1 at buybuy BABY stores and is working toward introducing this facility at Harmon stores by this week. Besides, the Buy Online Pick Up In Store option will be rolled out at its BABY stores this week.
Once the situation normalizes and the stores reopen, both BOPIS and curbside pickup services will be rolled out across all stores. In this context, management remains focused on prioritizing $250 million of capital expenditure for investments in digital space and Buy Online Pick Up In Store.
Apart from these, the company has entered into a definitive agreement to sell the PersonalizationMall.com business to 1-800-Flowers. The deal worth $252 million was supposed to be closed on Mar 30 but 1-800-Flowers.com was short of resources owing to COVID-19.
CVS Health Corporation (CVS - Free Report) , a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 6.3%.
Rite Aid Corporation’s bottom line beat the Zacks Consensus Estimate significantly, on average, over the trailing four quarters. Also, the company has a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Bed Bath & Beyond (BBBY) Q4 Earnings & Sales Beat Estimates
Bed Bath & Beyond Inc. reported better-than-expected sales and earnings in fourth-quarter fiscal 2019. However, both top and bottom lines declined on a year-over-year basis.
Results were hurt by soft store traffic, higher promotions and headwinds related to inventory management during the holiday season. Increased clearance activities also dented the quarterly results. That said, the company is progressing well with its inventory reduction program and has already reduced half of its inventory. Moreover, it expects to lower the remaining inventory by fiscal 2020.
Additionally, the company is facing business disruptions, given the uncertainty related to the COVID-19 outbreak. To this end, it has suspended its store remodeling plans and anticipates adverse impacts on its first-quarter and fiscal 2020 results. Consequently, it refrained from providing any guidance for fiscal 2020.
Overall, this Zacks Rank #3 (Hold) stock has plummeted 71.2% in the past three months compared with the industry’s 26.1% decline.
Q4 in Detail
Bed Bath & Beyond reported adjusted earnings of 38 cents per share for the fiscal fourth quarter, down 86.3% from $1.2 in the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate for earnings of 21 cents.
Net sales fell 6.1% to $3,107 million but exceeded the Zacks Consensus Estimate of $3,092 million. Although the solid performance during Cyber Monday contributed to the quarterly results, the downside was caused by comparable sales (comps) decline of 5.6%. Comps decreased due to a high-single-digit decline in transactions, somewhat offset by a low-single-digit increase in the average transaction amount.
Adjusting for the calendar shift, including Cyber Monday weeks, comps fell 11% in the reported quarter. The decline resulted from a loss of 13.6% in store sales, somewhat offset by a rise of 1.1% in digital sales.
Further, gross profit declined nearly 11.6% to $1,013.7 million in the reported quarter. Also, adjusted gross margin contracted 210 basis points (bps) to 32.6%, mainly driven by lower merchandise margins on increased promotional activity and higher markdowns.
SG&A expenses advanced 10% to $1,027 million, driven by gains from the company’s cost structure and optimization efforts. As a percentage of net sales, adjusted SG&A increased 250 bps to 30.7%, mainly owing to 100 bps of consulting expenses related to the ongoing transformation initiatives, review of assets and rise in advertising costs.
Further, the company incurred an operating loss of $81.2 million as compared to $296.7 million in the year-ago quarter.
Financial Position
Bed Bath & Beyond ended fiscal 2019 with cash and investments of roughly $1.4 billion. Long-term debt totaled $1,488.4 million and total shareholders' equity was $1,764.9 million, as of Feb 29, 2020.
In fiscal 2019, the company generated cash flow of about $590.9 million from operating activities and deployed nearly $277 million toward capital expenditures. However, the company has deferred $150 million of planned non-essential capital expenditure in light of the ongoing COVID-19 pandemic.
In the reported quarter, Bed Bath & Beyond did not repurchase any share. Further, it has suspended plans to utilize up to $600 million for lowering debt, share repurchases and dividends.
Store Update
In fourth-quarter fiscal 2019, Bed Bath & Beyond inaugurated two buybuy BABY stores and closed 26 outlets, including five namesake stores, 17 Cost Plus World Market stores, two buybuy BABY stores and two Harmon Face Values stores.
As of Feb 29, the company had 1,500 stores in operation, comprising 976 namesake stores across 50 states, the District of Columbia, Puerto Rico and Canada; 261 stores under the labels World Market, Cost Plus World Market or Cost Plus; 126 buybuy BABY stores; 81 stores under the labels Christmas Tree Shops, Christmas Tree Shops and That! or and That!; 53 stores under Harmon, Harmon Face Values or Face Values names; and three stores under the label One Kings Lane. Additionally, the company’s joint venture operates 10 flagship stores in Mexico.
Bed Bath & Beyond Inc. Price, Consensus and EPS Surprise
Bed Bath & Beyond Inc. price-consensus-eps-surprise-chart | Bed Bath & Beyond Inc. Quote
Business Developments
In response to the COVID-19 pandemic, the company extended store closures across the United States and Canada at least until May 2. Moreover, it is cutting on costs by furloughing the majority of employees in stores and some corporate associates until up to May 2. Further, the company is temporarily reducing salaries for its executive team by 30%. Meanwhile, the chairman of the board and independent directors will also give up 30% of their quarterly cash compensations.
Among other actions, it has drawn down the remaining $236 million from its revolving credit facility. It is also reducing expenses by lowering inventory levels and extending payment terms for goods and services. Further, the company has decided to cut down on discretionary expenses, including travel, advertising and store maintenance.
However, the company’s four e-commerce fulfillment centers remain operational. In a bid to expedite the delivery process and assign orders locally, it is on track to convert roughly 25% of Bed Bath & Beyond and buybuy BABY stores in the United States and Canada into regional fulfillment centers. Also, the company launched a curbside pickup facility on Apr 1 at buybuy BABY stores and is working toward introducing this facility at Harmon stores by this week. Besides, the Buy Online Pick Up In Store option will be rolled out at its BABY stores this week.
Once the situation normalizes and the stores reopen, both BOPIS and curbside pickup services will be rolled out across all stores. In this context, management remains focused on prioritizing $250 million of capital expenditure for investments in digital space and Buy Online Pick Up In Store.
Apart from these, the company has entered into a definitive agreement to sell the PersonalizationMall.com business to 1-800-Flowers. The deal worth $252 million was supposed to be closed on Mar 30 but 1-800-Flowers.com was short of resources owing to COVID-19.
Stocks to Watch
Best Buy (BBY - Free Report) has an expected long-term earnings growth rate of 7.6% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CVS Health Corporation (CVS - Free Report) , a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 6.3%.
Rite Aid Corporation’s bottom line beat the Zacks Consensus Estimate significantly, on average, over the trailing four quarters. Also, the company has a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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