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Why Shares of Bed Bath & Beyond Dropped Today

By Timothy Green – Updated Apr 10, 2019 at 7:07PM

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An analyst isn't seeing signs of a turnaround.

What happened

Shares of Bed Bath & Beyond (BBBY -8.41%) slumped on Monday, after an analyst downgraded the retailer. This comes nearly two months after a mixed fiscal third-quarter report sent the stock soaring. Shares were down about 5.3% at market close.

So what

Barclays analyst Matthew McClintock dropped his rating on Bed Bath & Beyond stock from "equal weight" to "underweight" on Monday, saying he isn't seeing signs of a turnaround.

Bed Bath & Beyond's third quarter, which ended on Dec. 1, was messy. Comparable sales were down 1.8%, and net income plummeted by 60%. But the company said that it was ahead of its plans on its long-term financial goals to moderate operating profit declines and grow earnings per share in 2020. Bed Bath & Beyond reiterated guidance calling for EPS of about $2 for fiscal 2018, and it said it sees roughly the same EPS in fiscal 2019.

Check out the latest earnings call transcript for Bed Bath & Beyond.

A woman in a store holding cookware.

Image source: Getty Images.

The first signs of stabilization may come in 2019 if all goes according to plan. But it may still be a while before the numbers really start moving in the right direction.

Now what

Bed Bath & Beyond has been struggling with slumping margins for a long time. Gross margin has been trending downward since 2012, and operating margin has fallen from 16.5% in 2011 to just 4.4% in the trailing-12-month period. None of the company's problems are sudden developments.

Bed Bath & Beyond's guidance for flat earnings next year is a positive, but the company still has a lot of work to do to turn things around.

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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