What happened

Shares of Bed Bath & Beyond (NASDAQ:BBBY) were down 7.9% as of 11:30 a.m. EDT Thursday after the home-goods retailer announced mixed fiscal fourth-quarter 2018 results. 

For its quarter ended March 2, 2019, Bed Bath & Beyond's revenue declined 11% year over year to roughly $3.31 billion, translating into a net loss of $253.8 million, or $1.92 per share. That said, its reported loss was largely driven by a noncash "goodwill and tradename" impairment charge taken during the quarter; on an adjusted (non-GAAP) basis, the company generated net income of $158.8 million, or $1.20 per share.

By comparison, most analysts were looking for lower adjusted earnings of $1.11 per share on higher revenue of $3.33 billion.

Yellow arrow chart indicating losses with black and white charts in the background

Image source: Getty Images.

So what

Investors should keep in mind Bed Bath & Beyond's top-line decline was largely driven by having one less week in the quarter compared to the year-ago period, as comparable-store sales fell a much more modest 1.4% year over year.

As for the company's ongoing transformation initiatives, CEO Steven Temares stated that it has accelerated the pace of its change to make "measurable progress within each of [its] four focus areas" -- namely, driving mid- and long-term revenue growth; leveraging sales mix and supply chain improvements to expand gross margins; reducing its selling, general and administrative expenses; and sustaining "world-class operational support."

"While this is a multiyear effort, our Board and management team are confident that the actions under way to drive our near-term and long-term financial targets will enable Bed Bath & Beyond to succeed and drive shareholder value," Temares added.

Now what

During the subsequent conference call, management told investors to expect net earnings per diluted share in fiscal 2019 ranging from $2.06 to $2.15 on a reported basis, and $2.11 to $2.20 per share excluding severance and "shareholder activity" costs -- with the latter referring specifically to the company's recent efforts to work with activist investors critical of its turnaround approach. By comparison, most analysts were modeling lower 2019 earnings of around $1.99 per share.

So why the share-price decline?

In short, management also stated they expect most of Bed Bath & Beyond's strength to materialize in the second half of this year due to the timing of their transformation initiatives. For the first quarter, they expect earnings per share ranging from $0.02 to $0.07, or $0.07 to $0.12 excluding the aforementioned costs. Wall Street was modeling for Q1 earnings of $0.29 per share, which means an already skeptical group of investors is being forced to take management's word that the company's financial performance will indeed improve as the year wears on.