Home Bed Bath & Beyond Adjusting Inventory but Misses Q2 Estimates
September 29, 2022

Bed Bath & Beyond Adjusting Inventory but Misses Q2 Estimates

By Mike Duff

Contributing Editor

Bed Bath & Beyond missed Wall Street estimates for the second quarter as sales slid and losses mounted.

Net loss was $366.2 million, or $4.59 per diluted share, versus a net loss of $73.2 million, or 72 cents per share, in the year-before quarter. Adjusted for one-time events, net loss was $256.4 million, or $3.22 per diluted share, versus net income of $3.7 million, or four cents per diluted share, in the quarter a year previous, Bed Bath & Beyond reported.

An analyst consensus estimate published by Yahoo Finance anticipated an adjusted diluted loss per share of $1.85 and sales of $1.47 billion.

According to the company, comparable sales tumbled 26% in the quarter year over year. Net sales fell 28% to $1.44 billion from the 2021 period. Operating loss was $346.2 million versus an operating loss of $84.1 million in the year-prior quarter.

Sue Gove, Bed Bath & Beyond director and interim CEO, said in a conference call that the company had been able to adjust inventory favorably in the second quarter. She said the company had seen “positive sales trends in seasonal categories and national brands where in-stock position and visual merchandising have improved. Additionally, our buybuy BABY business continues to hold market share relative to other mass market retailers despite the absence of child tax credits in a more competitive environment.”

However, Gove said overall results are unacceptable and that the company is moving fast to deal with factors that have hurt recent results with a back-to-basics strategy.

“Our results for the second quarter came in as previously expected and announced. While our sales and profit results do not yet reflect the strategic and financial actions we have initiated to change our performance, they do demonstrate sequential progress in several key areas. In the first quarter, we experienced a significant dislocation between sales and inventory that we began to address immediately during the second quarter. Aggressive inventory optimization actions, including accelerated markdowns and strategic promotions, led to double-digit improvement in this gap. Working with our supplier partners has also been an important focus area and our payables are considerably healthier than in the prior quarter as evident on our balance sheet,” said Gove.

Although changes in operations made by management have only just begun to take hold, Gove says Bed Bath & Beyond had seen indications of continued progress as merchandising and inventory changes began to take hold, particularly as to improved in-stock positions and visual merchandising.

“Our Welcome Rewards loyalty program also continues to gain momentum with membership expanding by more than 1.3 million since the end of August, for a total of 6.4 million members since launching this summer,” she said. “Enrolled members represent more frequent purchases and higher transaction values across all three banners. Our buybuy BABY business continues to hold market share relative to other mass market retailers in today’s highly competitive environment. We are enhancing our capabilities while leveraging Welcome Rewards, such as the relaunch of our baby registry business later this fiscal year, increasing the effectiveness of marketing investments and realizing the strategic shift of our merchandise assortment, which had minimal impact in this quarter, all targeted to drive customers and top-line growth.”

Gove added, “We have worked quickly to deploy strategic and financial changes swiftly to increase cash through business growth and lowering our cost structure by approximately $250 million in the second half of fiscal 2022, or an expected $500 million on an annualized basis. We are confident that our current liquidity will enable the necessary changes we are implementing. Regaining market share and enhancing liquidity are our top priorities.”

As announced on August 31, Bed Bath & Beyond secured more than $500 million of new financing, including an expanded $1.13 billion asset-backed revolving credit facility and a new $375 million FILO facility. Current liquidity is $850 million after repayments and borrowings that occurred subsequent to the fiscal 2022 second quarter, the company asserted. Also, the company’s 12 million share-at-the-market offering program has launched, which, to date, has sold approximately three million shares for approximately $30 million. Bed Bath & Beyond announced the program on August 31 and expects proceeds to advance strategic financial objectives, it noted.

In addition, the company maintained that it is considering liability management transactions with a particular focus on 2024 bonds. Transactions could launch in the third quarter and include offers to exchange current debt for new longer-tenured debt or equity at exchange ratios related to the then-current value of the current debt. However, transactions could take other forms or might not occur at all, Bed Bath & Beyond pointed out.  

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