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Stock Market News: Shopify, Bed Bath & Beyond Show Both Sides of Retail's Transformation

By Dan Caplinger - Feb 12, 2020 at 11:29AM

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Stocks climbed once again on Wednesday morning.

Wednesday morning brought fresh new gains to Wall Street, as market participants continued to feel more confident that the COVID-19 outbreak won't turn into a worst-case scenario either for world health leaders or the global economy. Upbeat economic data from the U.S. also bolstered sentiment. As of 11 a.m. EST, the Dow Jones Industrial Average (^DJI 1.34%) was up 199 points to 29,475. The S&P 500 (^GSPC 2.02%) rose 14 points to 3,372, and the Nasdaq Composite (^IXIC 0.00%) picked up 36 points to 9,675.

Earnings season is winding down, but there were still a few stocks today that released results. Shopify (SHOP 3.52%) continued to benefit from the rise of e-commerce in the small and mid-sized business niche, while a warning from home goods retailer Bed Bath & Beyond (BBBY 3.83%) was the latest example of how brick-and-mortar retail establishments are still struggling.

Shopify loves the holidays

Shares of Shopify jumped 12% after announcing fourth-quarter and full-year financial results. The numbers were surprisingly good, and the e-commerce tech specialist sees good times lasting into the coming year and beyond.

Shopify logo of green bag with S on it.

Image source: Shopify.

Shopify reported a 47% rise in revenue in the fourth quarter, with an equal gain in gross merchandise volume sold under its e-commerce platform. Subscription-based sales were healthy, but Shopify got an even bigger contribution to growth from its merchant solutions business. Adjusted net income jumped 70% year over year, sustaining impressive growth rates.

The e-commerce platform provider also sees 2020 playing out well. Full-year revenue should grow 35% to 37% over 2019 levels, and the company hopes to break even on an adjusted operating basis in the coming year.

Shopify has a number of irons in the fire designed to bolster growth, including its fulfillment network, international expansion plans, investment in brand awareness, and efforts to automate key functions to improve efficiency. Investors have high hopes for Shopify, and so far, the company has done a good job of not just meeting those expectations, but exceeding them.

Bed Bath & Beyond hope

Elsewhere, shares of Bed Bath & Beyond plunged 26%. The home goods retailer released some preliminary information from its fourth quarter, and investors didn't like what they saw.

The early numbers from Bed Bath & Beyond were bleak. For the first two months of the fiscal fourth quarter, which include December and January, comparable sales were down 5.4%. The retailer attributed the drop to declines in store traffic, along with issues with inventory management and heightened levels of price markdowns and promotions trying to entice shoppers into its locations.

The news was even worse when you separate out Bed Bath & Beyond's digital and brick-and-mortar businesses. Digital channel comps actually soared 20%, although much of that gain reflected the calendar shift of the Cyber Monday shopping week into the company's fiscal fourth quarter. But within physical stores only, comps plunged almost 11%. Without the Cyber Monday shift, moreover, Bed Bath & Beyond said total comps would've been down 13% during the period compared to a year ago.

Bed Bath & Beyond investors shouldn't expect to get final numbers for the quarter until mid-April, but shareholders didn't waste any time before sending the stock down sharply. Despite CEO Mark Tritton's characterization of the warning as reflecting "short-term pain" and his strategic vision for the future, it's far from clear what will be the catalyst to produce a meaningful turnaround for the home goods retailer.

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Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$9.76 (3.83%) $0.36
Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$372.64 (3.52%) $12.69
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$32,654.59 (1.34%) $431.17
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,088.85 (2.02%) $80.84
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,662.79 (0.00%) $0.00

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

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