Bed Bath & Beyond Plummets on Surprise Loss, Scrapped Guidance

Bed Bath & Beyond CEO Mark Tritton says the retailer's surprise third-quarter loss was 'unsatisfactory' and cautions that the path to profitability 'will not be linear.'
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Bed Bath & Beyond Inc. (BBBY) - Get Report shares posted their biggest one-day decline in more than a year on Thursday after the home-focused retailed posted a surprise third quarter loss under new CEO Mark Tritton and scrapped its full-year profit guidance. 

Bed Bath & Beyond recorded a loss of 31 cents per share for the three months ending on November 30, the group's fiscal third quarter, well shy of the Street consensus forecast of a 3 cents per share profit. Group revenues, the company said, fell 9% to $2.8 billion, just shy of analysts' forecast of a $2.86 billion tally.

Same store sales, which where hit by having one fewer week this year compared to 2018, and the fact that Cyber Monday revenues will be booked in the fourth quarter, tumbled 8.3%,

Bed Bath & Beyond said it expects sales and profitability to remain pressured over the final months of its fiscal year, and withdrew its previous profit forecasts, noting that new CEO Tritton -- who joined the company on October 9 -- would continue to "assess the business and finalize the details of our go-forward strategic plan."

"Let me be clear, these results are unsatisfactory and underscore the imperative for change and strengthen our sense of priorities and purpose," Tritton told investors on a conference call late Wednesday. "We must respond to the challenges we face as a business, including pressured sales and profitability and reconstruct a modern durable model for long-term profitable growth." 

"A path to achieving our objective will not be linear as evidenced by our third quarter results, but we will move quickly to course correct and drive the business forward," Tritton added.

Bed Bath & Beyond shares plunged more than 17% to $13.82 at the open on Thursday, a move that trims the stock's six-month gain to around 30% and values the Union, New Jersey-based retailer at just under $1.9 billion. 

"While Bed Bath & Beyond is facing near-term challenges, we expect the new board and management team to find assets to monetize (like property), non-core businesses to sell (most likely Personalization Mall and/or World Market), costs to cut (in the hundreds of millions of dollars), and merchandising and sourcing opportunities (in the hundreds of basis points)," said KeyBanc Capital analyst Bradley Thomas, who carries an overweight rating on the stock with an $18 price target. 

"As we consider the potential for an improvement in fundamentals, we await new CEO Mark Tritton’s further assessment of the business and operating plan, and we will closely monitor trends looking for improvements in sales," Thomas added. "Looking ahead, competition remains intense (from both online and physical retailers), and it will take significant work to reposition the business to remain viable in the LT, particularly considering the poor sales trends in 2019."