Bed Bath and Beyond on Wednesday reported a surprise holiday-quarter loss as the company ran low on inventories and struggled to get goods onto shelves from crowded ports.
The company’s shares rallied in premarket trading as investors weighed the news.
CEO Mark Tritton said that out-of-stock items caused the company to miss about $175 million in fourth-quarter sales. That’s up from the previous quarter, when supply chain bottlenecks cost the company about $100 million.
Tritton said in a CNBC interview that the home goods retailer was disappointed with its results. He said “major headwinds in the macro environment” have slowed the company’s turnaround efforts. For example, he said, goods cost more to move, and some top-selling items from national brands are in short supply due to missing components like microchips that go into the vacuum. Also, he said, most seasonal goods got stuck at ports and arrived late.
He said some of those challenges carried over into the current quarter.
Still, Tritton says, Bed Bath is making strides in transformation. He said it’s investing in technology, winning back customers with postcards and targeted emails, and growing its more profitable private label business.
Bed Bath has been on a bumpy road as Target veteran Tritton has attempted to refresh the retailer’s brand with the launch of private label products, store remodels and closures of underperforming locations. Its shares have been dragged into meme stock rallies along with AMC Entertainment and GameStop. It’s also come under pressure from investors — including activist Ryan Cohen, chairman of GameStop and founder of Chewy.
The retailer recently struck a deal with Cohen’s company RC Ventures, agreeing to add new board members and explore whether to spin off or sell its BuyBuy Baby business, which has been one of its bright spots.
Bed Bath didn’t provide any specific guidance on Wednesday, but expects sales and margins to improve in the second half of the upcoming fiscal year as supply chain conditions ease.
Here’s how the retailer has fared in the three months ended February 26, compared to analysts’ expectations based on Refinitiv data:
- Loss per share: 92 cents vs. expected earnings of 3 cents
- Revenue: $2.05 billion versus $2.07 billion expected
The company’s net loss increased to $159 million, or $1.79 per share, compared to net income of $9 million, or 8 cents a share, a year earlier. Excluding one-off effects, she lost 92 cents per share. Analysts polled by Refinitiv had expected earnings per share of 3 cents.
Revenue fell 22% to $2.05 billion, compared to $2.62 billion a year earlier. That fell short of estimates of $2.07 billion.
Same-store sales, a key retail metric, fell 12% across Bed Bath’s store compared to the prior-year period. Same-store sales for the “Bed Bath & Beyond” banner fell 15% and increased in the low single digits for the “BuyBuy Baby” banner.
Digital sales were down 18% compared to the same period last year, partly reflecting the shift back to stores and the normalization of e-commerce levels.
Tritton said Bed Bath is completely overhauling its supply chain so it can better manage all of its goods as it imports goods and transports them to distribution centers and stores. He said the technology, which works like “a virtual control tower,” will be operational by the end of this month. Those efforts are already underway but have become more urgent, he said.
“The timing of that push and the timing of completing the strategy is the friction point,” he said.
In addition to implementing its turnaround efforts, Bed Bath must compete for buyers’ dollars with inflation at about four-decade highs. Consumers are also weighing other spending priorities, like summer vacation and spring wardrobes, that may draw their attention away from the home.
Tritton said the background was more difficult for the retailer, especially as households ran out of extra dollars from the government like child tax credits. That “damps aggregate demand across multiple categories, including homes,” he said.
“We believe there is an evergreen, strong home market that has had some erratic ups and downs and if it normalizes we think there is a great deal to be made,” he said. “We are part of the lives of our customers and their wants and needs and making sure we stock and serve that need is our most important agenda.”
As of Tuesday’s close, shares of Bed Bath are up about 23% so far this year. The retailer’s stock closed at $17.97 fell 6.75% on Tuesday, taking its market value to $1.73 billion.
Read the company’s results press release here.