Suffering from a malaise that has lasted for years, losing billions of dollars in shareholder value, and now under attack from three private equity firms seeking to remove the CEO and entire board of directors, Bed Bath & Beyond (BBBY) is ready to report fourth-quarter earnings.

The third-quarter report surprised some with its apparent strength, but few expect the home goods retailer to repeat. The announcement is expected on April 10, so let's see whether Bed Bath & Beyond will show signs of the turnaround that management keeps promising is just ahead.

Shopping for pillows at a home decor store

Image source: Getty Images.

Sales growth -- or not

Management has already warned investors to expect a bad result in the fourth quarter. Partly due to a calendar shift that will see 52 selling weeks this year versus 53 last year, Bed Bath & Beyond's net sales are forecast to drop at a double-digit rate, accelerated by a shift in Easter that will move the holiday from the company's fiscal 2018 fourth quarter to its fiscal 2019 first quarter.

In a bid to boost profitability, the home goods retailer is also clearing out lower-margin merchandise while raising the order threshold for customers to qualify for free delivery. CFO Robyn D'Elia told analysts last quarter its actions support its "stronger bias toward driving profitability improvement over near-term sales growth."

Profits narrowing

Yet gross margins continue to narrow, ending the third quarter at 33% versus 35% in the year-ago period. Operating margins also collapsed, falling to just 1.6% from 3.7% last year. Bed Bath & Beyond says, however, that it's expecting full-year earnings to be flat at $2 per share, which would be a better result than the repeated declines investors have grown accustomed to.

Comparable-store sales also continue to fall, dropping 1.8% year over year, as store traffic declines. Comps have been down for seven consecutive quarters. There's no reason to anticipate that consumers will have surged into its stores this quarter, either, as management has been encouraging them to visit the retailer's online site. It does say its digital channels have experienced strong growth, however.

On the plus side...

For all that, Bed Bath & Beyond still generates a lot of cash and had around $1 billion in cash and investments at the end of the third quarter, almost double the amount from a year ago.

Unfortunately, although it remains a cash-generating machine, it has squandered a lot of that money on buying back stock to prop up its earnings. According to the activist investors prepping to challenge the board at the annual shareholder meeting, Bed Bath & Beyond has spent $8 billion since 2011 repurchasing shares at an average price of $59. Today the retailer's stock trades in the mid-teens range.

The key takeaway

Right now the biggest catalyst for Bed Bath & Beyond appears to be the activist investors challenging its board. The news that they were seeking to oust the incumbents caused the stock to rise over 20%, suggesting the market agrees a change is needed.

Yet even fresh faces will have a difficult time turning around this retailer amid intensifying competition. On the one side are large brick-and-mortar rivals like Walmart and Target, and on the other, more nimble e-commerce competitors like and Wayfair. Caught in the middle is Bed Bath & Beyond, which for too long assumed the demise of Linens 'n Things would allow it to coast along on its laurels.

The company has failed to effectively respond to new competition and changing consumer tastes for how and where they shopped, and it's been weighed down by a board that deferred to the company's founders. The result is that Bed Bath & Beyond is in danger of being unable to pull itself out of its long slow-motion decline into irrelevancy.