Bed Bath & Beyond shares dive more than 20% as supply chain issues hit sales, inflation eats into profits

Bed Bath & Beyond shares tanked 22% Thursday as the company said it saw a steep drop-off in shopper traffic in August, dealing a blow to its fiscal second-quarter results.

The big-box retailer is also dealing with industrywide supply chain complications, which Chief Executive Mark Tritton said have been “pervasive.” He said the company’s costs escalated over the summer months, especially toward the end of its second quarter in August, eating into sales and profits.

Bed Bath & Beyond slashed its revenue and earnings outlook for the year, and its third-quarter guidance looks underwhelming.

The sell-off of the retailer’s stock was robust. More shares changed hands Thursday than what is typical in an average day of trading for Bed Bath & Beyond.

Here’s how Bed Bath & Beyond did in its second quarter ended Aug. 28 compared with what Wall Street was expecting, based on a Refinitiv survey of analysts:

• Earnings per share: 4 cents adjusted vs. 52 cents expected
• Revenue: $1.99 billion vs. $2.06 billion expected

In the latest period, Bed Bath & Beyond lost $73.2 million, or 72 cents per share, compared with net income of $217.9 million, or $1.75 per share, a year earlier. Excluding one-time items, the company earned 4 cents a share, which was less than the 52 cents analysts expected.

Revenue fell 26% to $1.99 billion from $2.69 billion a year earlier. That came in short of estimates for $2.06 billion.

“While our results this quarter were below expectations, we remain confident in our multi-year transformation,” Tritton said in a press release.

Bed Bath & Beyond has been remodeling its stores and launching in-house brands that sell everything from bath towels to cooking utensils to dorm decorations. In its prior quarter, it appeared as if those efforts were paying off and momentum was building in the business.

But over the summer months, that progress stalled. Tritton explained that as Covid-19 fears reemerged amid the spreading delta variant, the environment became more challenging to work through. In states such as Florida, Texas and California, which account for a substantial chunk of sales, the business was hurt due to the rising number of coronavirus cases in the region, Tritton said.

That means not as many shoppers showed up during what is normally a busy back-to-school season for retailers such as Bed Bath & Beyond. It could spell trouble for rivals such as Target, Walmart and Kohl’s, which have yet to report results for the back-to-school period.

In fact, Bank of America just took its rating for Kohl’s stock down two notches, to underperform from buy, citing the potential impact of bottlenecks that could hurt the company’s ability to get inventory on store shelves.

Kohl’s shares were down nearly 8%. Other retail stocks, including department store chains Nordstrom and Macy’s, were trading lower Thursday.

According to Wells Fargo retail analyst Zachary Fadem, Bed Bath & Beyond’s hiccups in the second quarter “undeniably casts doubt” on the company’s ability to deliver on its multi-year turnaround roadmap.

“After several encouraging steps forward, Bed Bath & Beyond took a big step back in Q2,” Fadem said in a note to clients.

Bed Bath & Beyond expects third-quarter adjusted earnings to be between breakeven and 5 cents per share, with sales ranging from $1.96 billion to $2 billion. Analysts had been looking for earnings of 28 cents per share on sales of $2.02 billion, according to Refinitiv data.

For the year, Bed Bath & Beyond lowered its expectations and is now looking to earn between 70 cents and $1.10 per share, on an adjusted basis, on sales of $8.1 billion to $8.3 billion.

Previously, it was calling for annual adjusted earnings of between $1.40 and $1.55 per share, on sales of $8.2 billion to $8.4 billion.

Analysts were forecasting adjusted earnings per share of $1.51 on revenue of $8.31 billion in fiscal 2021.

Find the full press release from Bed Bath & Beyond here.