Bed Bath & Beyond Inc. (BBBY - Get Rating) operates as a retail store chain. The company sells domestic merchandise, bath items, kitchen textiles, and home furnishings. It sells its products through various websites and applications.

BBBY was the most popular name during this year’s return of the meme craze. The stock rose significantly before giving up its gains after GameStop Chairman Ryan Cohen dumped his entire 10% stake in the company.

Despite the massive up move in the stock between July and August, investors have been largely bearish on the company’s prospects. The company is trying to turn its fortunes around through an inventory shake-up and announcing strict measures such as layoffs and store closures.

The company said that it has started closing 150 of its “lower producing” namesake stores. It is also in the process of reducing costs by laying off about 20% of its workforce. The company has secured more than $500 million in financing to strengthen its balance sheet.

BBBY missed its consensus revenue and EPS estimates in the last reported quarter. Its loss per share came in higher than expected at $3.22, while its revenue came in 0.7% below consensus estimates. It has failed to surpass consensus EPS estimates in each of the trailing four quarters.

BBBY’s stock has declined 57.5% in price year-to-date and 72.1% over the past year to close the last trading session at $6.19. It is trading 79.4% below its 52-week high of $30.06, which it hit on March 7, 2022.

Here’s what could influence BBBY’s performance in the upcoming months:

Disappointing Financials

BBBY’s net sales declined 28% year-over-year to $1.43 billion for the second quarter that ended August 27, 2022. Its gross margin came in at 27.7%, compared to 30.3% in the year-ago period. The company’s adjusted EBITDA loss came in at $168 million, compared to an adjusted EBITDA of $85 million. 

In addition, its non-GAAP net loss came in at $256 million, compared to a non-GAAP net income of $4 million in the year-ago period. In addition, its adjusted loss per share came in at $3.22, compared to an adjusted EPS of $0.04.

Unfavorable Analyst Estimates

BBBY’s EPS for fiscal 2023 and 2024 is expected to remain negative. Its revenue for fiscal 2023 and 2024 is expected to decline 22.2% and 4% year-over-year to $6.12 billion and $5.87 billion.

Weak Profitability

BBBY’s trailing-12-month gross profit margin is 31.04%, compared to the 36.35% industry average. Likewise, its trailing-12-month net income margin is negative compared to the 5.86% industry average. Also, its trailing-12-month EBITDA margin is negative compared to the 11.25% industry average.

POWR Ratings Reflect Bleak Prospects

BBBY has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. BBBY has an F grade for Stability, consistent with its 1.57 beta.

It has an F grade for Sentiment, consistent with unfavorable analyst estimates. It has a D grade for Quality, in sync with its weak profitability.

BBBY is ranked #58 out of 62 stocks in the Home Improvement & Goods industry. Click here to access BBBY’s ratings for Growth, Value, and Momentum.

Bottom Line

BBBY is trading below its 50-day and 200-day moving averages of $9 and $12.59, indicating a downtrend. Although the company is taking measures to improve its cash position and offerings and reduce its spiraling costs, it is still far from reporting profits. Moreover, the nearly multi-decade high inflation is expected to dampen consumer sentiment, affecting its business further.

Given its disappointing financials, unfavorable analyst estimates, and low profitability, it could be wise to avoid the stock now.

How Does Bed Bath & Beyond Inc. (BBBY) Stack Up Against Its Peers?

BBBY has an overall POWR Rating of D, equating to a Sell rating. Therefore, one might want to consider investing in other Home Improvement & Goods stocks with an A (Strong Buy) or B (Buy) rating, such as Bassett Furniture Industries, Incorporated (BSET - Get Rating), Acuity Brands, Inc. (AYI - Get Rating), and Masonite International Corporation (DOOR - Get Rating).

BBBY shares were trading at $6.41 per share on Friday morning, up $0.22 (+3.55%). Year-to-date, BBBY has declined -56.04%, versus a -22.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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