Bed Bath & Beyond Plummets on 4th-Quarter Sales Decline

Big-box retailer's sales takes double-digit tumble on store closures

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James Li
Apr 14, 2021
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Shares of Bed Bath & Beyond Inc. (

BBBY, Financial) plunged more than 10% on Wednesday on the back of the company releasing double-digit sales decline during the fiscal fourth quarter of 2020.

For the three months ending Feb. 27, the Union, New Jersey-based home furnishings retailer reported net income of $9 million, or 8 cents in diluted earnings per share, compared with net loss of $65 million, or 53 cents in diluted loss per share, in the prior-year quarter. Despite this, revenue of $2.619 billion tumbled 16% from the prior-year quarter revenue of $3.107 billion, further missing the Refinitiv consensus estimate of $2.63 billion.

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Store closures and divestments weigh on revenues

Although the company reported comparable sales growth of 4% during the quarter, its third consecutive quarter of positive sales growth, net sales tumbled 16%, driven by unfavorable impacts from non-core banner divestitures and planned store closures. The company said that it closed 144 stores during fiscal 2020 as part of its network optimization program.

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The company announced in December 2020 that it will sell its Cost Plus World Market brand to Kingswood Capital Management, a Los Angeles-based private equity firm.

Stock tumbles as company earnings guidance also misses consensus estimates

Shares of Bed Bath & Beyond closed at $24.52, down 12.21% from Tuesday's close of $27.93 on the fourth-quarter sales decline and lower-than-expected earnings guidance for fiscal 2021. Despite this, the stock remains significantly overvalued based on Wednesday's price-to-GF Value ratio of 2.03.

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The company reaffirmed its fiscal 2021 net sales guidance range of between $8 billion and $8.20 billion, compared to the consensus estimate of $8.18 billion according to Refinitiv and down from the fiscal 2020 net sales of approximately $9.233 billion. Bed Bath & Beyond also mentioned that fiscal 2021 first-quarter net sales are expected to increase 40% from fiscal 2020 first-quarter net sales in spite of the non-core banner divestitures and disruptions due to the coronavirus pandemic.

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According to GuruFocus, Bed Bath & Beyond's three-year revenue growth rate of 3.2% outperforms over 62% of global competitors. Despite this, profit margins and returns are underperforming more than 60% of global competitors, suggesting low profitability even though the Piotroski F-score ranks 7 out of 9.

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Gurus with holdings in Bed Bath & Beyond include

Jim Simons (Trades, Portfolio)' Renaissance Technologies, Jeremy Grantham (Trades, Portfolio)'s GMO, Paul Tudor Jones (Trades, Portfolio)' Tudor Investment and Joel Greenblatt (Trades, Portfolio)'s Gotham Asset Management.

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Disclosure: No positions.

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I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!