Bed Bath & Beyond Inc. (BBBY - Get Report) shares were a rare standout retail gainer Thursday after it posted stronger-than-expected quarterly earnings and reaffirmed guidance for its full fiscal year.
Bed Bath & Beyond said net income for the three months ending in November, the company's fiscal third quarter, fell nearly 60% to 18 cents per share, but beat the consensus forecast by a penny. Group sales, however, rose 2.7% from the same period last year to just over $3 billion, even as comparable store sales fell -- by 1.8% -- for the seventh consecutive quarter.
The company said it will arrest that comparable store sale decline to around 1% for the whole of its 2018 fiscal year, however, and only a "low single-digit" slowdown in 2019. That should allow for flat year-on-year earnings of around $2 per share, a figure that topped the $1.57 consensus and led to a sharp spike in the stock in after-hours trading.
"Next year, we believe that to a greater degree, we'll be able to leverage a lot of the investments that we've been making both in technology and in people to be able to enhance the profitability," CEO Steven Temares told investors on a conference call late Wednesday. " It's not a cost-cutting exercise for us ... this is a natural evolution for us from all these investments that we've been making."
"We are still putting together the budgets, but we do believe that having an earnings per share next year equal to what it is this year is achievable," Temares added.
Bed Bath & Beyond shares rose 16.6% to $14.29, a move that values the Union, New Jersey-based retailer at about $1.97 billion.
Separately, the company declared a quarterly dividend of 16 cents per share payable April 16 to shareholders of record on March 15. The company repurchased about $8 million of its own stock in the third quarter.
Analysts at KeyBanc Capital Markets, however, noted that intensifying competition, as well as the need to add further investment into its website and mobile businesses, will continue to weigh on profitability.
"While we're encouraged that management believes investments can yield returns in 2019, we'd like to see traction before getting more positive, given the significant challenges in the business at this time," KeyBanc's Bradley Thomas said. "Ultimately, we remain concerned that underlying trends could get worse given the rapidly evolving consumer/ retail landscape."