Home goods retailer Bed Bath and Beyond Inc. (BBBY, Financial) reported weaker-than-expected second-quarter earnings results on Sept. 26.
Key metrics
The company reported quarterly earnings of $48.6 million, or 36 cents per share, down from $94.2 million, or 67 cents per share, in the year-ago quarter. Analysts were expecting earnings of 50 cents per share. Revenue was flat at $2.94 billion, which fell shy of the expected $2.96 billion.
Same-store sales fell 0.6%, versus a growth estimate of 0.3%. This was the company’s sixth straight quarter of comps decline.
The next generation of stores
The company struggled to grow its store traffic during the quarter. Bed Bath and Beyond said its in-store operations need to get back to track in order to help increase its online sales and compete against Amazon (AMZN, Financial). The company’s next-generation stores, however, performed exceedingly well, with sales spiking approximately 4% year over year.
The company plans to have a total of nearly 40 next-generation stores by next spring. The retailer currently has nine stores with the new format and remains on track to double that number this fall.
Looking ahead
Shifting gears, the company expects third-quarter sales to decline in the mid-single-digit range and fourth-quarter revenue to plunge in the high-single-digit range. The company cited changes in the corporate calendar and the imposition of tariffs on imports from China as the reasons for their negative outlook. On a conference call, Chief Financial Officer Robyn D’Elia commented on the impact of tariffs:
"Regarding tariffs, everything we know today about the impact on our business we've built into the back half. For us, our direct imports from China represent a relatively small number of business…….And we're just -- we're continuing to learn things through domestic vendors and we'll continue to learn about that into the future. And we're considering all of our options in terms of mitigation strategies. But again, it's all built into the model that we provided."
With respect to its three-year financial goals comprising its vision for 2020, the company said that it will face moderate declines in operating profit and earnings per share in the current fiscal year and 2019. Fortunately, it expects to return to earnings per share growth in 2020.
Disclosure: I do not hold any positions in the stocks mentioned in this article.
