Bed Bath & Beyond (BBBY) shares tank on supply chain issues

Bed Bath & Beyond stocks were down 22% on Thursday as the company said it saw a sharp drop in buyer traffic in August, which took a blow to its second-quarter results.

The wholesaler is also addressing industry-wide supply chain complications that are “ubiquitous” according to CEO Mark Tritton. He said the company’s costs rose during the summer months, particularly towards the end of the second quarter of August, which had an impact on sales and profits.

Bed Bath & Beyond has cut its sales and earnings outlook for the year and its guidance for the third quarter looks disappointing.

The sell-off in the retailer’s stock has been robust. More stocks changed hands on Thursday than is typical for Bed Bath & Beyond on an average trading day.

Here’s how Bed Bath & Beyond performed in the second quarter ended Aug. 28 compared to Wall Street’s expectations, based on a refinitive poll of analysts:

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

In the most recent period, Bed Bath & Beyond lost $ 73.2 million, or 72 cents per share, compared to net income of $ 217.9 million, or $ 1.75 per share, last year. Excluding one-off effects, the company earned 4 cents per share, which was less than the 52 cents expected by analysts.

Revenue declined 26% to $ 1.99 billion from $ 2.69 billion last year. That fell short of the estimate of $ 2.06 billion.

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

One blow from a delta-powered Covid spike

Bed Bath & Beyond has remodeled its stores and launched its own brands that sell everything from bath towels to cooking utensils to dorm decorations. In the previous quarter, it seemed like those efforts paid off and the business gained momentum.

But this progress stalled in the summer months. Tritton stated that the environment became more difficult as Covid-19 fears re-emerged amid the spreading Delta variant. In states like Florida, Texas and California, which account for a significant proportion of sales, business has been impacted by the rising number of coronavirus cases in the region, Tritton said.

That means that not as many shoppers have shown up during the normally busy back-to-school season for retailers like Bed Bath & Beyond. It could mean trouble for rivals like Target, Walmart, and Kohl’s, who aren’t yet required to report back-to-school results.

In fact, Bank of America has just lowered its rating on Kohl’s stock two notches to underperform the purchase, and points to the potential impact of shortages that could affect the company’s ability to bring inventory to shelves.

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

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

“After several encouraging steps forward, Bed Bath & Beyond took a big step back in the second quarter,” said Fadem in a statement to customers.

Lowering expectations

Bed Bath & Beyond expects adjusted earnings between break-even and 5 cents per share for the third quarter on sales of $ 1.96 billion to $ 2 billion. According to Refinitiv data, analysts had expected earnings of 28 cents per share on sales of 2.02 billion US dollars.

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

Previously, the company had claimed annual adjusted earnings of between $ 1.40 and $ 1.55 per share on sales of $ 8.2 to $ 8.4 billion.

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

The full press release from Bed Bath & Beyond can be found here.

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