Bed Bath & Beyond (BBBY) Reports A Larger-Than-Expected Loss As It Makes A Lot Of Changes
3:09 pm Thursday, September 29th, 2022
Bed Bath & Beyond (BBBY) is holding up fairly well today despite a much larger than expected loss with its Q2 (Aug) report this morning. However, the good news was that revenue was in-line and same store comps of -26% were in-line with prior guidance. Also, it sounds like BBBY is making some early progress on the strategic and financial actions it announced last month.
To quickly review, on the financial side, BBBY announced in August that it will implement an at-the-market (ATM) 12 mln share offering program. On the strategic side, BBBY will be scaling back its owned brands to focus more on National brands. There were also some cost cutting measures, including closing 150 stores and cutting corporate and supply chain staff by 20%. It also reduced its FY22 cap-ex guidance to $250 mln from $400 mln. We were also surprised to hear BBBY put the kibosh on any talk of spinning off or selling its buybuy BABY segment.
Looking ahead, the next big decision will be the naming of a new CEO. Sue Gove is acting as interim CEO for now. We thought we might get a new person named today, but that was not the case.
Quickly on the comps, the Bed Bath & Beyond banner was the main culprit for the large comp decline, coming in at -28%, reflecting a legacy merchandise assortment, out of stocks, and continued trends in customer traffic. buybuy BABY was a bit better, not great with a comp decline in the high-teens as this banner focused on maintaining market share. It was also lapping tough high-teens comps in the year ago period.
Overall, we think investors were expecting a rough and messy quarter, especially on EPS given all the merchandise and other recent changes. So this was not a surprise and explains why the stock is holding up. We remain cautious on BBBY and would avoid the stock. We suspect it will remain volatile given its meme status and short squeeze potential. Also, the ATM offering is likely to keep a lid on the shares. We do not expect a near term turnaround.