Please ensure Javascript is enabled for purposes of website accessibility

Why Bed Bath & Beyond, Inc. Stock Dropped Today

By Steve Symington - Dec 21, 2017 at 12:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The home-goods retailer fell despite a solid quarterly report. Here's what happened.

What happened

Shares of Bed Bath & Beyond Inc. (BBBY 21.82%) were down 12.2% as of 11 a.m. EST Thursday after the home goods retailer announced stronger-than-expected quarterly results, but followed with cautious forward-looking commentary.

More specifically on the former, Bed Bath & Beyond's fiscal third-quarter 2017 revenue was roughly flat compared to the same year-ago period, at $3.0 billion -- slightly above investors' expectations -- including a modest 0.3% decline in comparable-store sales. On the bottom line, that translated to net earnings of $61.3 million, or $0.44 per diluted share, above consensus estimates for $0.37 per share and down from $0.85 in last year's fiscal third quarter.

Stock market prices and charts overlaying an LED display


So what

During the subsequent conference call, CFO Sue Lattmann credited Bed Bath & Beyond's stronger sales performance to "opportunistic marketing spend and increased promotional offerings" that the company had planned going into the quarter. However, she also noted that as the holiday season approached, the increased promotional environment potentially pulled some sales forward from the fiscal fourth quarter.

"This justified in the short term a more aggressive approach to satisfy customers," Lattmann added, "which has continued to be necessary as we approach Christmas."

Now what

Bed Bath & Beyond expects full fiscal-year revenue to be flat to slightly positive (including a benefit from an extra week in the year), assuming a comparable-sales decline in the low-single-digit percent range. And despite its earnings beat this quarter, Bed Bath & Beyond reiterated its expectation for full fiscal-year earnings to be roughly $3.00 per share.

To be sure, it's somewhat concerning that Bed Bath & Beyond's outperformance this quarter was the result of sales pulled forward from the busy holiday quarter. But keep in mind that the stock had climbed more than 20% in the month leading up to this report, partly on speculation in early December that the retail chain could benefit greatly from the passage of a new congressional tax bill.

So while it's painful for any long-term investor to see a stock drop, in this case it seems Bed Bath & Beyond is merely giving back a portion of those gains on today's relative disappointment.

Steve Symington 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
$12.95 (21.82%) $2.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.