Bed Bath & Beyond (BBBY, Financial) released its first-quarter financial results on July 10 after market close. The company’s earnings and revenue declined from the prior year.
Earnings highlights
The home goods retailer recorded a net loss per diluted share of $2.91 in the first quarter, down from net earnings of 32 cents per diluted share reported in the first quarter of the previous year. Quarterly revenue stood at $2.6 billion, down 6.6% year-over-year.
Gross profit in the quarter was $887.2 million that reflected a decline of approximately 8%. Gross profit margin dipped 50 basis points to 34.5% as a result of lower merchandise margin that was only partially offset by lower coupon as well as net direct-to-customer shipping expense.
At the end of the first quarter, its cash and investment balance stood at a combined $923 million. Long-term debt amounted to $1.49 billion.
Declining comps
Same-store sales plunged 6.6% in the reported quarter owing to fewer store transactions, which a rise in the average transaction amount only partially compensated for. Poor comps growth was also attributable to a decline in physical store sales coupled with low growth in the direct-to-consumer business. Consensus projected a comparable store sales decline of 5.6%.
Efforts
Interim CEO Mary Winston said that the company would make efforts to turn its sagging sales around by trimming costs and changing its organizational structure. Further, the company is putting money into to refurbish its brick-and-mortar outlets and broadening its digital presence to compete with retail behemoth like Amazon (AMZN, Financial).
What competition is doing
The chain trails behind traditional retailers that have been able to increase their offerings of home goods and direct-to-consumer online brands. Wal-Mart (WMT, Financial), Target (TGT, Financial) and Amazon’s strategy was to roll out private-label home brands at extremely competitive pricing. In contrast, Wayfair (W, Financial) spent on advertising to promote the brand and make it known to target customers.
Per a UBS pricing study, though Bed Bath & Beyond has worked on lowering product prices, they still remain 10% higher than Amazon and similar other brands.
Outlook
The company also provided fiscal 2019 guidance. Bed Bath & Beyond expects its net sales to be at the lower end of its prior range of $11.4 billion to $11.7 billion. The company also projected earnings per share in the lower end of its previously provided range of $2.11 to $2.20.
It plans to close a minimum of 40 Bed Bath & Beyond stores this year.
Disclosure: I do not hold any position in the stocks mentioned.
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