What happened
Shares of Bed Bath & Beyond (BBBY +0.00%) faded Wednesday, though no news came out regarding the home goods retailer. Instead, the stock's decline seemed to be driven by a pair of external factors. First, a rally in meme stocks like GameStop and AMC Entertainment earlier this week faded; and second, home goods retail stocks were down broadly Wednesday after negative comments from RH (formerly known as Restoration Hardware) in its earnings report Tuesday night.
As of 3 p.m. ET, Bed Bath & Beyond was down 13.4%.
Image source: Getty Images.
So what
Meme stocks had another rally starting last week and into this week, helped by news that GameStop Chairman Ryan Cohen had bought another 100,000 shares of his company. There was no specific news out on Bed Bath and Beyond, but meme stocks can move in sync with each other as interest in these types of stocks rises and falls. Bed Bath & Beyond shares gained 20% over the first two days of this week.
On Wednesday, however, AMC was down by 10% in late afternoon trading, and Gamestop had fallen 2.9%, helping to bring Bed Bath and Beyond stock down.
The other piece of news that seemed to prompt the sell-off was a disappointing earnings report from RH, the high-end furnishings retailer. While RH competes at a much different price point than Bed Bath and Beyond, the company badly missed revenue estimates and offered guidance calling for slower revenue growth than expected in 2022. On its earnings call, CEO Gary Friedman said that the business slowed in the second half of the fourth quarter and decelerated further in February after Russia invaded Ukraine.
Those comments seemed to spook the broader home furnishings sector. Williams-Sonoma and Wayfair were also down by more than 5% Wednesday afternoon.
Now what
This pullback shouldn't be of immediate concern to investors as the movements of meme stocks aren't meaningful to the company's fundamentals, and Bed Bath & Beyond operates in a different part of the home furnishings market than RH.
We'll get an update from Bed Bath & Beyond on April 13 when it turns in its fiscal fourth-quarter earnings report. For the period, which ended Feb. 28, analysts are expecting revenue of $2.08 billion, down 20% from a year ago, due to divestitures and tough comparisons to the prior-year period, when its sales were still experiencing pandemic-related tailwinds. They also are anticipating earnings per share of $0.04, compared to $0.40 in the year-ago quarter.
Following RH's commentary about its recently ended quarter, analysts could dial down their expectations for Bed Bath & Beyond's next report even further.
