When Bed Bath & Beyond Inc. reports fiscal second-quarter earnings on Thursday, analysts will have one big question on their minds: When will turnaround efforts pay off?
The results for the home-goods retailer, which sells items like bedsheets, towels and cookware, will arrive after an epic rise and fall for the "meme stock" amid moves by an activist investor, aggressive cutbacks and the death of an executive that was ruled a suicide. Bed Bath & Beyond's $(BBBY)$ turnaround efforts will be the focus of this report, and analysts already have their doubts about executives' plans coming to fruition anytime soon.
Morningstar analyst Jaime Katz said she would be looking for more specifics on the second half of the company's fiscal year on Thursday, as well as what executives' efforts to right the ship mean longer term for operating margins. For now, she said, the plan lacks "newness" -- returning to selling national brands that don't provide the retailer with pricing power, after walking back plans to sell cheaper, private-label fare that had unfocused messaging, is unlikely to be enough.
"There's this duration fatigue," Katz said in an interview with MarketWatch. "When does it find its footing?"
Bed Bath & Beyond has pruned executives, slashed jobs, product offerings and spending, and announced plans to close dozens of stores. The company last month said it secured $500 million in new financing. It ended its fiscal first quarter with cash and equivalents of around $108 million, down from around $1.1 billion in the year-earlier period.
While those cuts seem like a start to the plan, the full course is still in question, Katz said, and the end appears to be nowhere in sight. Executives will attempt to give more clarity in a conference call Thursday morning following the release of the results.
"Whenever you think you're sort of that the bottom, we haven't really found it yet," Katz said. "Are we there? What does that look like? Those are questions that have really not been answered to any degree."
What to expect
Earnings: Analysts polled by FactSet on average expect Bed Bath& Beyond to lose $1.80 a share on an adjusted basis, compared with a 4 cents a share in earnings a year ago. That would mark the retailer's fourth consecutive per-share loss, according to FactSet.
Contributors to Estimize -- a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others -- on average are expecting a bigger loss of $1.99 a share.
Revenue: Bed Bath & Beyond is expected to report sales of $1.447 billion on average, FactSet reports, compared with $1.985 billion in the year-earlier period. Estimize contributors predict $1.435 billion on average.
Stock Price: Bed Bath & Beyond stock finished 4.5% lower on Monday, and is down 56% so far this year. By comparison, the S&P 500 is down 23% in 2022.
Earlier in the year, activist investor Ryan Cohen -- the chairman of fellow meme stock GameStop Inc. $(GME)$ and the founder of online pet-supplies retailer Chewy Inc. $(CHWY)$-- disclosed a large stake in Bed Bath & Beyond. But Cohen last month unloaded that position, selling off what amounted to 11.8% of the company's shares outstanding. Shares nosedived, not long after meme traders banded together to drive the stock higher.
What to watch for
Katz also noted that Bed Bath & Beyond reports as higher interest rates eat into demand on the housing market, and, potentially, the home furnishings sold at retailers. Analysts say the company, considered a "category killer" in decades past, was late on building its e-commerce infrastructure, and it has faced tougher competition from other big-box retailers and Amazon.com Inc. $(AMZN)$ .
A rushed rollout of cheaper private-label offerings through the pandemic ran up against supply-chain snarls and lukewarm consumer enthusiasm, the Wall Street Journal reported. The pandemic's stay-at-home boom gave way to the return of travel and entertainment and higher prices.
Mark Tritton, the chief executive who oversaw that private-label rollout, departed in June. Chief Financial Officer Gustavo Arnal died early this month after falling from a skyscraper in Manhattan, not long after a lawsuit alleging he and Cohen engaged in a pump-and-dump scheme involving the retailer's stock.
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