Bed Bath & Beyond Seesaws Lower After Another Wider-Than-Expected Loss, but the Improved Inventory Outlook

Home-goods retailer extends string of bottom-line misses to 6 quarters, but beats FCF guidance has made 'progress' on inventories.

Shares of Bed Bath & Beyond Inc. seesawed into negative territory in morning trading Thursday, after the home-goods retailer reported a much wider-than-expected fiscal second-quarter loss, but showed that "accelerated markdowns" had helped improve the inventory overhang.

The stock rallied dropped as much as 5.6% in premarket trading just moments after the release of the results, then shot up to a gain of as much as 6.2% before paring gains. Since the opening bell, the stock has traded in a range of down 5.4% to up 1.7%, and before settling to be down 0.9% in recent trading.

The company $(BBBY)$ reported a net loss for the quarter to Aug. 27 that widened to $366 million, or $4.59 a share, from a loss of $73 million, or 72 cents a share, in the same period a year ago. Gross margin contracted to 27.7% from 30.3%, to reflect the negative impact of accelerated inventory clearance.

Excluding nonrecurring items, such as severance costs and other restructuring charges, the adjusted per-share loss of $3.22 was wider than the FactSet loss consensus of $1.79. That marks the sixth-straight quarter the company has missed bottom-line expectations.

Total sales fell 27.6% to $1.44 billion, just below the FactSet consensus of $1.45 billion, while same-store sales matched expectations of a 26.0% drop. That's the fifth-straight quarter the company missed top-line expectations.

On the bright side, merchandise inventories were valued at $1.58 billion as of Aug. 27, down from $1.73 billion at the end of February and just below last year's $1.59 billion.

And free cash flow $(FCF)$ was negative $320.5 million, which was slightly better than guidance provided last month for FCF usage of approximately $325 million. And the company said it anticipates operating cash flow to be "breakeven" by the end of fiscal 2022.

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"While our sales and profit results do not yet reflect the strategic and financial actions we have initiated to change our performance, they do demonstrate sequential progress in several key areas," said interim Chief Executive Sue Gove.

Gove said that after suffering a significant dislocation between sales and inventory in the first quarter, the company started immediately addressing that dislocation in the second quarter. "Aggressive inventory optimization actions, including accelerated markdowns and strategic promotions, led to double digit improvement in this gap," Gove said.

The results come after the "meme stock" suffered an asteroid-like plunge following a meteoric surge over the past couple months, as an active crowd of retail investors fended off cash concerns, job cuts, store closures, a sales warning and the death of its chief financial officer that was ruled a suicide.

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The stock rocketed about 359% from the end of July to Aug. 17, then has plunged 72% since then through Wednesday's close.

Looking ahead, the company reiterated the fiscal 2022 guidance range provided last month for a comparable sales decline "in the 20% range."

So far this year, Bed Bath's stock has tumbled 56.1%, while the SPDR S&P Retail exchange-traded fund $(XRT)$ has sunk 36.6% and the S&P 500 index has shed 23.8%.