Bed Bath & Beyond (NASDAQ:BBBY) is set to report fiscal first-quarter earnings on Wednesday, July 10, but despite activist investors cleaning house at the home-goods retailer last month, investors shouldn't expect the financials to be any different.

There's been no marked difference since the changeover and since it occurred so late in the quarter, it wouldn't have impacted the retailer's earnings for the period anyway. Moreover, the industry is still undergoing a transformation of its own, one that doesn't look kindly on Bed Bath & Beyond making a recovery. With so much going against the company, let's take a look at what investors can expect.

Two women shoppers looking at pillows in a store.

Image source: Getty Images.

What's going on with the coupons?

Sales were down 11% in the fourth quarter, though much of that was due to an extra selling week in the year-ago period. Comparable-store sales slumped 1.4% in that quarter, and though Bed Bath & Beyond produced a profit of $1.20 for the period, that was significantly below the $1.41 per share it had made in the previous year's fourth quarter.

Part of the problem has been the proliferation of Bed Bath & Beyond's ubiquitous blue-and-white 20%-off coupons. Although they bring customers in the door, they eat away at profit margins, which fell across the board last quarter.

Although activist investors have been critical of the prior management team's continued reliance on discounting, they were aghast that the company had planned to dramatically limit coupon use without having a backup plan in place to lure in customers.

This week's quarterly report will likely show us one of two things: Either management made good on its promise to scale back couponing prior to the changes in the corporate management structure, which could have resulted in sales tumbling, or it left them in place, which would mean margins narrowed even more. Neither is a welcome prospect.

Although the retailer has reported strong digital sales at its online sites, such as One Kings Lane,, and Decorist, they can't actually account for all that much since their sales are included in comps, which have fallen for eight consecutive quarters, meaning the drop in store traffic far outweighs whatever online sales are being made.

The way forward

Investors should probably ignore much of the financial results this quarter, whatever they are. The transformation plan the prior management team laid out, even though it lacked specificity and mainly offered aspirational goals, is all out the window now.

Bed Bath & Beyond will essentially be starting with a clean slate (though it will still be towing significant baggage). Private equity firms Legion Partners, Macellum Advisors, and Ancora Advisors successfully ousted the company's founders and CEO from their executive positions and from the board of directors, and also succeeded in getting a raft of new faces to serve on the board.

They maintain that there is still a lot of brand value left in Bed Bath & Beyond, and that the old executive team was not up to the task of unlocking it. That's what investors should really look for, to see if the new executives can spell out how they plan to drive sales and profits and turn Bed Bath & Beyond around.

Their task is not easy. Walmart and Target have become formidable home goods rivals and the online home goods sphere, led by Amazon and Wayfair, has changed the way people shop for even furniture. Bed Bath & Beyond was late to meeting the challenge, and investors will want to hear what the plan is now to get customers in the door without the incentive of a coupon.

Watch and wait

Obviously the first-quarter numbers matter, as they provide the baseline from which the company hopes to grow, but direction accounts for more than location and it's really how the company responds now that's key. All eyes should be focused on the plans management lays out.

Bed Bath & Beyond has always been a cash-producing machine, and despite another poor quarter, it ended fiscal 2019 with almost $600 million in free cash flow. That at least gives the new team the financial wherewithal to carry out its plan, but execution is everything and this retailer will remain a risky bet until we see that there's hope for a turnaround.

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