Bed Bath & Beyond's (NASDAQ:BBBY) most recent quarterly report is kind of like a rubber ducky -- bobbing along, but not picking up much speed. Will the next report show us a swan on the move?
This week's earnings report was no worse than expected, certainly. In fact, a bit better, as the company managed to "beat" the midpoint of its self-reduced guidance:
- Sales dropped about 1% in comparison to last year's Q3, as new store openings mitigated a slip in comparable sales that exceeded 5%.
- Per-share profits dropped 35% to $0.34 per share, a penny better than Wall Street had expected.
- More importantly, management guided us to expect a similar "mid-single digit percentage decrease" in comps in the current fiscal fourth quarter, resulting in about $0.43 per share profit, and about $1.53 per share for the year.
"Importantly?"
Management told us what to expect in December, and they delivered it in January. Yawn. What we really want to know is what happened at Bed Bath in December, when archrival Linens 'n' Things kicked its liquidation sales into high gear.
The good news here is that things may not be as bad as feared. Because if management is correct in its projections, then comparable-store sales in Q4 are trending toward being no worse than what we saw in Q3, suggesting that Linens 'n' Things implosion didn't suck quite all the wind out of Bed Bath's sales.
Bed Bath's predicament
Now, there's the issue of inventories to contend with. You may recall that I've been harping on this issue for some months now. But in case you do not, here's the problem in a nutshell: Sales are stagnating, while inventories of unsold goods are rising. Q3's news differed little from what we've seen in recent quarters in this regard. With sales down 1% year over year, inventories continue to rise, up another 6.8%.
On the plus side, though, Bed Bath is no longer worst in class in inventory management. After reviewing its peers' latest quarterly numbers, it now appears that Pier 1 (NYSE:PIR) has the worst inventories-to-sales growth relationship (with sales falling 12 points faster than inventories.) Like Lowe's (NYSE:LOW) and Williams-Sonoma (NYSE:WSM), Bed Bath's inventory levels aren't trending along with the top line. However, in comparison to the previous two quarters, inventory growth has pared back. Still, the company is far from working its way closer to the inventory management performance recently reported by retailers like Target (NYSE:TGT), Home Depot (NYSE:HD), and Wal-Mart (NYSE:WMT).
Whether it can maintain this momentum in a fourth quarter that saw its biggest rival's everything-must-go sales, is the real question. Unfortunately, it's a question for which we must wait three more months for an answer.
What did we expect out of Bed Bath & Beyond last quarter, and what did we get? Find out in:
