Bed Bath & Beyond Inc. (BBBY, Financial), a major home-furnishings retailer, traded 22.49% lower than its previous close at 9:50 a.m. on Thursday on low sales guidance for fiscal 2018.
For the quarter ending Sept. 1, the Union, New Jersey-based company reported net income of $48.6 million, or 36 cents per diluted share, compared to net income of $94.2 million, or 67 cents per diluted share in the prior-year quarter.
Company announces long-term initiatives that may negatively impact short-term sales guidance
On the call, Bed Bath & Beyond CEO Steven Temares listed four pillars to long-term success, including assortment and offering; engagement and marketing; services and experiences and operational excellence. The CEO reminded investors “there are no shortcuts for long-term success” and that it takes strong management execution across all channels of its business to achieve earnings growth by fiscal 2020.
Temares listed several strategic initiatives for fiscal 2019, including the establishment of 40 next generation stores by the spring of 2019 and the promotion of its Beyond+ membership. While “there is still more work to do,” the CEO said the company has completed nine stores and expects to complete nine more by late fall.
Although management expects these initiatives to achieve long-term growth by fiscal 2020, Chief Financial Officer Robyn D’Elia reduced the company’s net sales guidance for fiscal 2018, with comparable sales relatively flat compared to fiscal 2017 and net earnings of $2, near the low end of the previous earnings guidance.
GuruFocus ranks Bed Bath & Beyond’s profitability 8 out of 10 primarily due to consistent revenue growth over the past 10 years, including a three-year revenue growth rate that outperforms 81% of global competitors. Despite this, the website also warns that gross and operating margins have declined over the past five years. Fiscal 2018 gross margins are expected to decline due to “continued investment in customer value proposition” and impacts from the Beyond+ and college savings pass programs according to D’Elia.
Share price falls over 22%
Bed Bath & Beyond traded around $14.57, approximately $4.24 lower than its previous close of $18.81.
Gurus with top holdings in Bed Bath & Beyond include Hotchkis & Wiley and Primecap Management.
Disclosure: no positions.
