What happened

Shares of retailer Bed Bath & Beyond (NASDAQ:BBBY) tumbled on Wednesday following a second-quarter report that disappointed on all fronts. The company missed analyst estimates for both revenue and earnings, and it slashed its guidance for the full year. The stock was down about 14% at 11:15 a.m. EDT.

So what

Bed Bath & Beyond reported second-quarter revenue of $2.94 billion, down 1.7% year over year and $70 million below the average analyst estimate. Comparable sales slumped 2.6%, with a 20% rise in digital sales unable to fully offset a mid-single-digit decline from stores.

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Earnings came in at $0.67 per share, down from $1.11 per share during the prior-year period and $0.28 lower than analysts were expecting. The company blamed $0.08 of the decline on restructuring charges related to the realignment of the store management structure, $0.02 on the impact from Hurricane Harvey, and $0.01 on the new share-based accounting standard.

Lower sales and higher costs accounted for the rest of the earnings decline, with operating expenses rising 7.6% year over year. Bed Bath & Beyond's share-buyback program helped prop up the per-share numbers, but it wasn't nearly enough to prevent a steep earnings decline.

Now what

Bed Bath & Beyond now expects to produce earnings per share of just $3 in fiscal 2017. The company had previously guided for a low-single-digit to 10% decline, which would have put EPS at about $4.12 at worst.

The company plans to cut more than $150 million of costs over the next few years, investing some of the savings in growth initiatives. Bed Bath & Beyond's online business is growing at a double-digit pace, but the underperformance of the stores is overwhelming that progress. With increased competition from online retailers, Bed Bath & Beyond may never be as profitable as it once was.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.