Bed Bath & Beyond Inc. swung to a second-quarter loss and reported profit and sales that missed expectations. The chain slashed its revenue and earnings outlook for the year.
The retailer which is in the midst of a three-year transformation effort that includes remodeling stores and launching private brands, said it saw a big drop in shopper traffic in August. It also cited supply chain challenges and escalating cost inflation.
Bed Bath & Beyond’s net loss totaled $73.2 million, or $0.72 per share, for the quarter ended Aug. 31, compared to net income of $217.9 million, or $1.75 per share, in the year-ago quarter. Adjusted earnings per share of $0.4 was well below analysts’ estimates of $0.52.
Sales fell 26% to $1.985 billion, below estimates for $2.059 billion. Comparable sales were down 1%, which the company attributed to the decline in August traffic.
"While our results this quarter were below expectations, we remain confident in our multi-year transformation. stated Mark Tritton, president and CEO. “Following solid growth in June, we saw unexpected, external disruptive forces towards the end of the quarter that impacted our outcome. In August, the final and largest month of our second fiscal period, traffic slowed significantly and, therefore, sales did not materialize as we had anticipated. As COVID-19 fears re-emerged amid the on-going Delta variant, we experienced a challenging environment.This was particularly evident in large, key states such as Florida, Texas and California, which represent a substantial portion of our sales.”
In addition, Tritton cited “unprecedented” supply chain challenges which have been impacting the industry “pervasively.”
“We saw steeper cost inflation escalating by month, especially later in the quarter, beyond the significant increases that we had already anticipated,” he said. “This outpaced our plans to offset these headwinds. These factors impacted sales and gross margin."
On a positive note, the company’s Buybuy Baby banner continued to build on its positive momentum from the past several quarters, growing double digits amid strength in apparel and travel gear and increasing market share for the period. Also, Bed Bath & Beyond’s higher-margin owned brands are outperforming penetration goals across the overall chain, and even stronger in remodeled stores, according to Tritton.
“Operationally, we entered the next phase of our supply chain modernization through our partnership with Ryder which is instrumental to our strategy,” he said. We are committed to executing over the short, mid and long term, especially during these early stages of our multi-year plan."
[Read More: Bed Bath & Beyond’s three-year plan includes store remodels, tech investments]
Bed Bath & Beyond is looking for third-quarter sales between $1.96 billion to $2.0 billion, flat comparable sales, and adjusted EPS in the range of $0.00 to $0.05. Analysts had forecast sales of $2.021 billion, comp growth of 2% and EPS of $0.29.
For the full year, the company is forecasting sales of $8.1 billion to $8.3 billion, flat-to-slightly up comparable sales, and adjusted EPS in the range of $0.70 to $1.10, with the totals all below analysts’ estimates.
As of August 28, 2021, the company had a total of 999 stores, including 813 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada, 132 Buybuy Baby stores and 54 stores under the names Harmon, Harmon Face Values or Face Values. The joint venture to which the company is a partner operates 10 stores in Mexico under the name Bed Bath & Beyond.