What happened

Shares of Bed Bath & Beyond (NASDAQ:BBBY) were falling again today as investors continued to react to the company's disappointing fourth-quarter earnings update earlier this week and analysts weighed in on the challenges.

The stock was down 4.4% as of 11:40 a.m. EST on Friday after losing as much as 6.1% earlier in the session.

A bedroom set.

Image source: Getty Images.

So what

Bed Bath & Beyond stock tumbled 20.6% on Wednesday after the retailer said that comparable store sales fell 5.4% in December and January. Adjusting for Cyber Monday's shift into the fourth quarter this year, comps were actually down 13%. Management said the comps drop was caused by traffic declines as well as inventory management issues, increased promotional activity, and markdowns. 

Investors had been hopeful that new CEO Mark Tritton, who joined the company in November after serving as Target's chief merchandising officer, would be able to guide a turnaround. But these numbers throw the challenges he's facing into stark relief. Tritton noted that digital sales in the period grew 20%, a positive sign, though in-store sales were down 11%. Gross margin also fell 300 basis points due in part to promotional activity, indicating that profits were probably down significantly.

Thursday, J.P. Morgan lowered its price target on Bed Bath & Beyond from $13 to $10, but maintained a neutral rating. Analyst Christopher Horvers said the earnings update was evidence that "things were likely to get worse before they get better." That followed at least two other analysts who also cut their price targets the day before.  

Now what

In the aftermath of the update, Wall Street cut its average earnings estimate for Bed Bath & Beyond's fourth quarter from $1.09 to $0.41 per share. Since the fourth quarter is the company's most profitable, that's a sign that it could be tracking for a loss in fiscal 2020 depending on how effective Tritton is with his turnaround plan. 

The stock surged when Tritton was named the new CEO in October, but reality seems to be catching up with the stock now. Even if he is able to fix the business, it won't happen overnight.