Bed Bath & Beyond Inc. (NASDAQ: BBBY) stock fell over 11.7% in the pre-market session of January 9th, 2020 after the company swings into a quarterly loss, withdrew its annual financial guidance and posted lower than expected results for the third quarter of FY 19. Same-store sales, which is a key measure for retailers, declined 8.3% in the fiscal third quarter, that was a deeper slide than the 4.9% drop expected by analysts, according to Consensus Metrix. The business was challenged by pre and post of Thanksgiving holiday period, despite favorable results on a shifted basis during the five-day holiday shopping period from Thanksgiving to Cyber Monday. According to the company, third quarter results were unsatisfactory and the performance was impacted due to self-inflicted issues such as poor inventory management, non-competitive pricing and a lack of convenient shopping options like BOPIS. During the third quarter, BBBY had closed 14 stores across all concepts and opened four stores. The company now plans to close approximately 40 total stores, including about 20 Bed Bath & Beyond stores.
Further, the company ended the third quarter with $920 million in cash and investments. Retail inventories of $2.7 billion at cost that reflected a decline of 10% or $289 million at cost during the quarter compared to the end of the prior year period excluding the impact of the incremental reserve for future markdowns.
Meanwhile, the company had initiated a plan last quarter itself to aggressively reduce up to $1 billion of inventory at retail over the next 18 months as part of the near-term priority to review and optimize the asset base. This included the removal of about $350 million of inventory at retail before the holiday.
BBBY in the third quarter of FY 19 has reported the adjusted loss per share of 38 cents, missing the analysts’ estimates for the adjusted earnings per share of 3 cents, according to Zacks Investment Research. The company had reported 9 percent decline in the adjusted revenue to $2.76 billion in the third quarter of FY 19, missing the analysts’ estimates for revenue of $2.85 billion. The company’s adjusted gross margin for the third quarter contracted to 32.3% of net sales as compared to 33.1% in the third quarter of last year. This 80 basis point decline is mainly due to the decrease in merchandise margin, on the back of a higher level of promotional activity in the third quarter and was partially offset by a decrease in net direct to customer shipping expense.