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: Bed Bath & Beyond says Q4 revealed unforeseen weaknesses and the strength of its baby-focused chain

Bed Bath & Beyond Inc. says the fourth-quarter uncovered unexpected weaknesses, but also showed the strength of the company’s buybuy Baby chain.

Bed Bath & Beyond

swung to a loss for the quarter and missed on sales, with comp sales down 12%.

Chief Executive Mark Tritton highlighted the inventory shortages and supply chain problems the company had, which hurt sales by about $175 million. Other challenges include inflation, omicron and other problems being experienced across retail and beyond.

“Internally, these factors have exposed more short-term to medium-term vulnerabilities that we did not foresee at this stage of our transformation as we completely rebuild the foundation of our business,” he said during the earnings call, according to a FactSet transcript.

“There have been operational deficits in our near-term execution.”

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Tritton says “major items advertised in our circular” were out of stock with merchandise stuck somewhere in the supply chain and unavailable to customers.

While the company works through those issues with new distribution centers, and makes improvements in other areas of the business, management called out a bright spot in the print.

“I can tell you, we’re very happy with the financial performance of buybuy Baby,” said Chief Financial Officer Gustavo Arnal on the call.

Buybuy Baby reached $1.4 billion in sales for the year, equal to double-digit growth.

“[W]e have been talking to the Street and media for some time around buybuy Baby as an opportunity, that is not showing its true value to a shareholder,” Tritton said.

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Activist investor group RC Ventures pushed Bed Bath & Beyond to explore strategic alternatives for buybuy Baby earlier this year. The two sides came to a “cooperation agreement” last month.

Bed Bath & Beyond plans to open 20-to-25 buybuy Baby locations this year.

“Rather than improving its position in the market, Bed Bath & Beyond is falling back and is rapidly losing share of both sales and customers,” wrote Neil Saunders, managing director at GlobalData, after the earnings announcement.

“Put bluntly, these numbers raise some serious questions about management’s strategy and the execution of its plans.”

Saunders says the disappointing numbers were posted against the backdrop of strong consumer demand for home items. And looking ahead, Saunders says there could be even bigger problems if the economic landscape deteriorates.

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Saunders also calls out what he says are “somewhat bland” owned brands, which has been a focus for the company, with launches like Haven, for bath items, and Wild Sage, targeting younger shoppers.

“The problem is that other than seemingly copying Target, the brand has not moved to a new and compelling position which is capable of capturing shopper share,” Saunders wrote.

Tritton was previously chief merchant at Target Corp.

Bed Bath & Beyond is a meme stock that has risen and fallen wildly in recent months. The stock has advanced 22.7% for the year to date, but has slumped 36% over the past 12 months.

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