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Bed Bath & Beyond Shares Surge After Surprise Q4 Earnings Beat

Bed Bath & Beyond will suspend buybacks and dividends as it grapples with what new CEO Mark Tritton called an unprecedented challenge from COVID-19.

Bed Bath & Beyond Inc.  (BBBY) - Get Bed Bath & Beyond Inc. Report shares surged Thursday after posting stronger-than-expected fourth quarter earnings even as it cautioned that coronavrus closures would pressure plans to revive the struggling home furnishings retailer.

Bed Bath & Beyond said adjusted earnings for the three months ending on March 2, the company's fiscal fourth quarter, were pegged at 38 cents per share. That's down 68.3% from the same period last year but 18 cents ahead of the Street consensus forecast. 

Group net sales, the company said, fell 6.1% to $3.1 billion, again topping analysts' estimates of a $3 billion tally. Comparable store sales fell 10%, Bed Bath & Beyond said, while digital sales tumbled 16% amid weaker holiday activity.

The retailer said it wouldn't provide profit guidance for the current fiscal year but noted that the COVID-19 pandemic would impact performance as stores remain shuttered in both the U.S. and Canada. It also suspended plans to spend $600 million on share buybacks, dividends and debt reduction.

"Frankly, it seems like a different place and time. Life as we knew it before March is a distant memory." new CEO Mark Tritton told investors on a conference call late Wednesday. "So in this moment, we are taking a holistic approach to managing our financial position, including larger efforts to reduce operating costs and strengthen our liquidity." 

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"In conjunction with the recent decision to extend the temporary store closures, we implemented several additional cost reductions, including a furlough the majority of our store associates and a percentage of our corporate associates until at least May 2nd," he added.

Bed Bath & Beyond shares were marked 20.5% higher Thursday to change hands at $5.35 each, a move that would still leave the stock with a year-to-date decline of around 65%.

"Bed Bath & Beyond's F4Q 2019 results were better than we expected, but this was primarily due to our expectations being too pessimistic," said Loop Capital analyst Anthony Chukumba, who carries a hold rating with a $5.00 price target for the stocks. "We continued to see many worrisome signs in the company's results, including declining comparable sales, gross margin degradation, and SG&A expense deleverage." 

"In addition, we think the fact the vast majority of the company's stores are currently closed will make it all the more difficult for President and CEO Mark Tritton to begin to execute his turnaround plan," he added.

Tritton, a 30-year retail industry veteran who has been credited with major improvements at Target  (TGT) - Get Target Corporation Report and Nordstrom  (JWN) - Get Nordstrom Inc. Report, joined Bed Bath & Beyond late last year, replacing the outgoing Mary Winston shortly after the Union, N.J., retailer trimmed its full-year profit guidance following weaker-than-expected same-store sales for its fiscal second quarter.

Tritton promptly scrapped the guidance in early January, however, after the company posted a surprise loss of 31 cents over its fiscal third quarter as revenues fell 9% to $2.8 billion and same-store sales slumped 8.3%.