Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

What Bed Bath & Beyond Wants Investors to Know

By Demitri Kalogeropoulos - Jul 16, 2019 at 9:36PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

On the latest earnings call, the struggling retailer's executives broke down the details of another difficult quarter.

Bed Bath & Beyond ( BBBY -6.66% ) isn't any closer to returning to profitable sales growth. Instead, the specialty retailer just delivered a quarterly report featuring weaker revenue than management had predicted, while profit margins took another step lower.

On the conference call with investors, interim CEO Mary Winston and her team didn't have much concrete data they could point to that would indicate that a turnaround was on the way. However, they did express confidence that the chain would eventually recover with help from a few major initiatives that are being rolled out across its store base. Let's take a closer look at what management had to say about the quarter and their rebound strategy.

Multiple escalators inside a busy shopping mall.

Image source: Getty Images.

A tough quarter

[Comparable-store] sales from our stores declined in the high single-digit percentage range, partially offset by slight growth in comp sales from our customer-facing digital channel.

-- CFO Robyn D'Elia

After comp sales fell by about 1% in each of the last three fiscal years, the trend worsened at the start of fiscal 2019. Comparable-store sales dropped 7% in Q1, modestly trailing management's initial target. That result translated into a market share loss in the e-commerce channel as the company scaled back on its free shipping offers.

The bigger concern was plunging customer traffic at the retailer's physical stores. "It is clear that the company has not kept pace with how the customer has evolved and how consumers shop today," Winston said. 

Profit trends are improving

To be clear, our efforts will be focused on opportunities to drive profitable sales growth.

-- Winston

Bed Bath & Beyond's strategy prioritizes profitability over sales growth, with initiatives that include cutting popular but low-margin products from its offerings, reducing coupon usage, raising prices, and cutting back on e-commerce promotions. Each of these moves contributed to the quarter's sharp sales decline.

The good news is that these moves also slowed the chain's profit pinch. Gross margin fell by 0.5 percentage points, which was an improvement over the prior quarter's 1.2 percentage-point slump.

 A plan for stability

Our ultimate objective is to find the right balance between our physical and digital presence within the markets we serve and to deliver the shopping experience our customers want.

-- Winston 

Executives didn't articulate how they plan to convince customers to return to Bed Bath & Beyond's stores except to say that the chain has all the necessary ingredients for growth, including an attractive and expanding industry and a strong brand. Management is focused on updating and improving the in-store experience, but it's hard to see how their latest efforts will differ from those of the past year.

Yet investors should see concrete changes around the store base as the company completes its review of its real estate assets this year. After looking at each location's profitability, it's likely that Bed Bath & Beyond will announce a restructuring plan aimed at right-sizing the business and reducing its cost burden.

Stay tuned

As we move forward, taking into consideration both the work to be done in our transformation as well as continuing challenges and broader retail environments, we are taking a more conservative approach to our outlook for the remainder of fiscal 2019.


The chain now predicts that sales and profits will land at the low end of the guidance range they issued at the start of 2019, and that portends a fourth consecutive year of falling sales with profitability faring only slightly better. Executives couldn't estimate when the rebound might take hold since the company is searching for a permanent CEO and has several major restructuring initiatives in the works. Given the weakening traffic trends, investors have to assume things might get worse in the short term as they wait for more clarity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
$17.11 (-6.66%) $-1.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.