Bed Bath & Beyond on Wednesday reported a double-digit decline in fiscal fourth-quarter sales, as ongoing store closures and divestments that are part of a bigger turnaround plan continue to weigh on results.
Its shares were falling around 1% in premarket trading.
The big-box retailer reaffirmed a prior sales outlook for the coming fiscal year, noting that positive sales momentum has carried into the current quarter. Many Americans have turned to the company’s stores and website during the Covid pandemic to buy cleaning supplies, kitchen appliances, bedding and other items for their homes.
Results in its first quarter, however, are going to be messy, Chief Executive Mark Tritton explained in an interview. In the year-ago period, all of Bed Bath & Beyond’s stores were shut due to the health crisis, and it was totally reliant on its digital business to fuel sales. That’s unlike some retailers, notably Walmart and Target, that have been able to keep their stores open throughout the pandemic.
“What you see is some number turbulence,” Tritton said. “You’re going to see a bifurcation in the retail market.”
Here’s how the company did during the quarter ended Feb. 27, compared with what analysts were anticipating, using a survey by Refinitiv:
- Earnings per share: 40 cents adjusted vs. 31 cents expected
- Revenue: $2.62 billion vs. $2.63 billion expected
Bed Bath & Beyond’s net income during the period grew to $9.1 million, or 8 cents per share, compared with a loss of $65.4 million, or 53 cents per share, a year earlier. Excluding one-time adjustments, the company earned 40 cents per share, better than the 31 cents expected by analysts, polled by Refinitiv.
Net sales fell about 16% to $2.62 billion from $3.11 billion a year earlier. That was slightly short of the $2.63 billion that analysts were anticipating.
The company said the year-over-year decline was driven, in part, by the sale of its Christmas Tree Shops and Cost Plus World Market businesses, as well as ongoing store closures.
Same-store sales rose 4%, the company said. Online sales surged 86% during the fourth quarter, but that wasn’t enough to totally offset reported double-digit declines of in-store traffic. The company noted that 41% of online sales were fulfilled by stores.
Bed Bath & Beyond reaffirmed its fiscal 2021 sales outlook, which calls for sales to be within a range of $8 billion and $8.2 billion. Analysts were estimating 2021 sales of $8.18 billion, according to Refinitiv.
The current quarter will be impacted by not only store closures in the year-ago period, but also by the company’s ongoing restructuring. Its four core banners are Bed Bath & Beyond, Buybuy Baby, Harmon Face Values and Decorist.
The retailer is forecasting first-quarter net sales to increase by more than 40% year over year. Analysts had been calling for a 45.8% jump. Excluding the impact from divested businesses, however, Bed Bath & Beyond said sales from its four core banners could grow upwards of 65% to 70%.
‘Early days’
Tritton played a crucial role in his previous gig as chief merchant at Target, to help the big-box retailer build excitement with customers around exclusive brands and refurbished stores. Wall Street is still waiting to see if he can achieve the same success at Bed Bath & Beyond.
As part of Tritton’s turnaround plans, Bed Bath & Beyond is in the process of remodeling roughly 130 to 150 stores this fiscal year, including 26 remodels during the first quarter. It just completed its first batch in the Houston market in February.
The company said it will spend about $250 million over the next three years to remodel roughly 450 Bed Bath & Beyond shops, in total. That involves decluttering aisles and removing sky-high piles of merchandise often seen on top shelves, adding fresh signage and installing more modern light fixtures.
“It’s early days,” Tritton told CNBC about the remodels. “Normally we have a period of adjustment as we go through every remodel … it’s about a 12-week process.”
Bed Bath & Beyond is also bolstering its roster of private labels across different categories of home goods. It’s planning to launch at least eight brands this year, hoping the exclusivity will be enough to drive people to its stores over the competition, which includes Amazon.
Last month, it debuted Nestwell, which sells bed and bath items. Haven, a spa-inspired bath brand, will launch next week.
Bed Bath & Beyond has said it expects its private-label sales will grow to represent 30% of its business within three years, up from about 10% from today. The company said these efforts should also help boost its profitability.
As the year progresses, Bed Bath & Beyond said it expects sequential improvement in profit margins. Its hope is that pressures from heightened freight costs, which have impacted many retailers over the course of the pandemic, will ease.
“In 2020, our mix of digital to stores was outsized,” Tritton said. “A digital sale, because of the shipping costs, is always a little different. We’re going to see that recalibrate in 2021.”
This year, the company plans to buy back $325 million of its own stock, up from $300 million last year. Its three-year repurchase authorization was increased to $1 billion, from $825 million.
Bed Bath & Beyond shares are up about 57% year to date. The company has a market cap is $3.4 billion.
Find the full earnings press release from Bed Bath & Beyond here.
—CNBC’s Courtney Reagan contributed to this reporting.