Bed Bath & Beyond misses in Q1; store closings likely

Bed, Bath & Beyond, which missed sales and earnings expectations for its first quarter, is focusing online for growth.



Citing strong digital growth, CEO Steven Temares said on the chain's quarterly earnings call that he expects store closings to increase as leases expire and as the way customers shop continue to evolve.



"As leases come up for renewal, if we cannot reach acceptable terms with our landlords, we would expect the pace of store closings to increase, as a result of our assumptions regarding bricks-and-mortar store traffic in future years," Temares said.



For the quarter ended May 27, Bed, Bath & Beyond reported net earnings of $.53 per diluted share ($75.3 million), including an unfavorable impact of approximately $.05 from the adoption of the new share-based payment accounting standard. This compares with $.80 per diluted share ($122.6 million) in the year-ago period.



Net sales were approximately $2.7 billion, up approximately 0.1% from the prior year quarter. Same-store sales were down approximately 2.0%. Same-store from digital channels saw growth in excess of 20%, while comparable sales from stores declined in the mid-single-digit percentage range.



In its quarterly release, Bed Bath & Beyond said that, in addition to in-store softness, it also faced higher direct-to-customer shipping expenses, coupon expenses, and advertising costs during the quarter.



"It remains to be seen whether these challenges were more pronounced in, or unique to, the first quarter due to the smaller sales base in this period, and/or a later start to the summer selling period," the company said.



At this time, Bed Bath & Beyond Inc. is not updating its full year modeling assumptions provided during its April 5, 2017 conference call with analysts and investors.



Although the first quarter is typically the least impactful quarter in terms of annual sales and earnings, and while the company continued to have strong growth in its customer-facing-digital channels this quarter, the company did experience increased softness in transactions in stores, as well as higher net-direct-to-customer shipping expense, coupon expense, and advertising costs during the quarter. It remains to be seen whether these challenges were more pronounced in, or unique to, the first quarter due to the smaller sales base in this period, and/or a later start to the summer selling period.



As of May 27, 2017, the company had a total of 1,546 stores. This includes: 1,022 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Puerto Rico and Canada; 276 stores under the names of World Market, Cost Plus World Market or Cost Plus; 113 buybuy BABY stores; 80 stores under the names Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!; and 55 stores under the names Harmon, Harmon Face Values or Face Values.