Bed Bath & Beyond issues worrisome warning
The holiday season got off to a horrible start at Bed Bath & Beyond and things went downhill from there, judging from the industry leader’s uncharacteristic and concerning profit warning.
The company badly missed its third quarter sales and profit forecast for a period that included most of Thanksgiving weekend, and said its same-store sales for the fourth quarter were likely to increase 1%.
Sales during Bed Bath & Beyond’s third quarter -- which ended Nov. 28 and included Thanksgiving, Black Friday and the following Saturday -- were well below a forecast the company provided on Sept. 24 when it reported second quarter results. At that time, executives told investors they envisioned third quarter same-store sales to increase in the range of 1% to 3%.
The company now expects comps to decline 0.4%. Total sales during the period are expected to increase 0.3% to roughly $3 billion, but that figure too is well below the company’s forecast that had total sales growing between 1.8% and 4%. As a result, earnings per share are expected to range from $1.07 to $1.10, considerably less that earlier guidance in the range of $1.14 to $1.21, when the company reports third quarter results after the market closes on Jan. 7.
It doesn’t appear sales trends at Bed Bath & Beyond have improved meaningfully since the end of the third quarter. The company said it expects same-store sales to increase 1% from the beginning of the quarter through Christmas. Bed Bath & Beyond made that announcement the evening of Dec. 22 when there was still considerable last-minute shopping to be done. More details on sales and profit expectations for the fourth quarter will be provided with the release of third quarter results.
Based on the slow start to the fourth quarter it is inconceivable the company would surpass the 3.7% fourth quarter same-store sale increase record in the fourth quarter of 2014.
In the meantime, Bed Bath & Beyond CEO Steven Temares offered a limited explanation for the company’s difficulties.
"Our performance in the third quarter reflects the recent trends we have been experiencing," Temares said. "On the one hand we experienced softer in-store transaction counts, and on the other hand sales from our customer-facing digital channels demonstrated strong growth, in excess of 25%. These mixed results were also impacted by the overall softness reported in the macro-retail environment during the quarter. As the retail environment continues to evolve, we remain focused on positioning our company for long-term success."