What happened

Specialty retailer Bed Bath & Beyond (NASDAQ:BBBY) lost 17% last month compared to a slight increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

BBBY Chart

BBBY data by YCharts.

The slump pushed shares to new lows, and the company is now down by more than 50% over the past 12 months.

So what

Investors reacted harshly to the latest earnings report, which came out in the middle of the month. In that announcement, Bed Bath & Beyond revealed that first-quarter sales at its existing locations fell in the mid-single-digit range as customer traffic dropped.

Profitability worsened, too, as it cut prices while spending more aggressively on supporting its digital sales channel.

The interior of a mall with shoppers appearing blurry.

Image source: Getty Images.

Now what

Bed Bath & Beyond ended the quarter with a healthy inventory position and plenty of cash, which means CEO Steven Temares and his team have time to work through their recovery plan. However, given the latest operating trends and the need for continued investments in the digital business, investors should expect more profitability declines over at least the next two years. Sales will also be pressured by a shrinking store base.

The retailer is targeting a return to earnings growth in 2020, but shareholders are likely to remain pessimistic until they see evidence of a turnaround, especially on customer traffic trends.

Demitrios Kalogeropoulos 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.