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Why Bed Bath & Beyond Inc. Stock Plunged Today

By Steve Symington – Apr 12, 2018 at 5:00PM

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The specialty retail chain offered tidy quarterly results and underwhelming forward earnings guidance. Here's why.

What happened

Shares of Bed Bath & Beyond Inc. (BBBY -4.18%) were down 19.4% as of 3 p.m. EDT Thursday after the specialty retailer announced reasonably strong fiscal fourth-quarter 2017 results, but followed with a disappointing outlook.

More specifically on the former, Bed Bath & Beyond saw quarterly net sales increase 5.2% year over year to $3.72 billion, as a 0.6% decline in comparable-store sales was more than offset by an extra week in the quarter as compared to the same year-ago period. On the bottom line, that translated to earnings of $1.48 per share, down from $1.84 per share in fiscal 2016 Q4.

Analysts, on average, were looking for lower earnings of $1.39 per share on roughly the same revenue.

A Bed Bath & Beyond Store front with shoppers walking in and out.

Image source: Bed Bath & Beyond.

So what

Bed Bath & Beyond added that it enjoyed "strong sales growth" from its customer-facing digital channels, while sales from brick-and-mortar locations declined in the mid-single-digit percent range.

Looking to fiscal year 2018, however, Bed Bath & Beyond told investors to expect net earnings per diluted share in the low- to mid-$2 range -- well below the $2.76 per share that Wall Street was anticipating.

Now what

During the subsequent conference call, management elaborated that net sales in fiscal year 2018 are expected to be flat to slightly positive compared to 2017, with growth partly held back by one less week in the year.

According to CFO Sue Lattmann, the company is also "making heavy investments in people, processes and technology as we continue the transformational work necessary to accomplish our goals."

Those investments will mean sacrificing some near-term profits, so it's no surprise to see the market recoiling in response. But you can be sure investors will be watching closely for updates in the coming quarters on whether Bed Bath & Beyond's efforts to return to sustained, profitable growth are yielding the desired fruit. If they do, this pullback could prove to be an enticing buying opportunity.

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.

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