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Why Bed Bath & Beyond Stock Tumbled Today

By Timothy Green – Sep 27, 2018 at 2:03PM

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Profits fell off a cliff at the struggling home goods retailer.

What happened

Shares of Bed Bath & Beyond (BBBY 0.56%) carved out a new 52-week low on Thursday after the retailer reported disappointing second-quarter results. A slump in comparable sales despite a strong consumer environment, a steep drop in earnings, and reduced full-year guidance sent the stock 22.5% lower by 12:15 p.m. EDT.

So what

Bed Bath & Beyond reported second-quarter revenue of $2.935 billion, flat compared to the second quarter of 2017 and about $20 million below the average analyst estimate. Comparable sales declined by 0.6%, with growth in online sales more than offset by a mid-single-digit sales decline in stores.

A declining chart.

Image source: Getty Images.

Earnings per share came in at $0.36, down from $0.67 in the prior-year period and $0.14 below what analysts were expecting. Gross margin dropped 2.7 percentage points year over year to 33.7%, while operating expenses edged up. Operating income tumbled by 53%.

Now what

Bed Bath & Beyond now expects its full-year comparable sales to be roughly flat compared to last year, a slight reduction from its previous outlook. The company also now sees its full-year earnings per share at roughly $2, the low end of its previous range.

Bed Bath & Beyond still expects to slow down the declines in operating profit and earnings per share through fiscal 2019 and to return to earnings-per-share growth by fiscal 2020. But with the stock now trading for around 7 times the company's new full-year earnings guidance, the market just doesn't buy it.

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.

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