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Why Bed Bath and Beyond Stock Was Tumbling Today

By Jeremy Bowman - Apr 14, 2021 at 2:07PM

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Shares of the home goods retailer pulled back on fourth-quarter earnings.

What happened

Shares of Bed Bath and Beyond (BBBY -5.23%) were moving lower today after the company's fourth-quarter earnings report disappointed investors. Though the results met expectations, the stock was already up substantially from pre-pandemic levels, meaning high expectations were already baked into the stock, and the company did not raise its outlook.

As of 1:28 p.m. EDT, the stock was down 10.4%.

A bedroom set on display.

Image source: Getty Images.

So what

Comparable sales in the quarter were up 4% across the enterprise (the company owns several brands) and 6% at Bed Bath and Beyond stores. The company has experienced a mixed impact from the pandemic, benefiting from tailwinds in the home goods sector but also being challenged by a decline in traffic at its brick-and-mortar stores.

Overall revenue in the quarter declined 16% to $2.62 billion, a reflection of divestitures and store closures, which essentially matched the analyst consensus at $2.63 billion.  

The company saw a modest improvement in profitability as adjusted gross margin increased 20 basis points to 32.8% due in part to fewer markdowns and promotions. It also slashed adjusted selling, general and administrative expenses by $190 million due to the divestitures of banners like World Market and Christmas Tree Shops.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the quarter increased 13% to $168 million, and adjusted earnings per share rose from $0.38 to $0.40, beating the consensus at $0.31.

Looking ahead, CEO Mark Tritton said:

As our transformation continues to take hold, we will show up differently for our customers with enhanced omnichannel experiences and modern stores, new communications and differentiated Owned Brands that will elevate the shopping experience and make it even easier to shop with the new Bed Bath & Beyond.

Now what

The company reiterated its guidance for fiscal 2021, saying it expected sales of $8 billion to $8.2 billion, which compares to a comparable base of $7.94 billion in sales in 2020. It also called for adjusted EBITDA of $500 million to $525 million. For the first quarter, it expects a surge in comparable sales as it laps the worst of the pandemic's impact but sees comps leveling off at just flat growth over the result of the fiscal year, as the company will lose some of the tailwinds in the home goods boom last year.

That lack of comps growth may be one reason why the retail stock is selling off today.

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