Why Bed Bath & Beyond Keeps Disappointing on Earnings

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Bed Bath & Beyond Inc. (NASDAQ: BBBY) is a company that just cannot seem to have a good earnings report these days. Even when the retailer of home goods beats on earnings, there usually seems to be some disappointment in same-store sales or other revenue metrics.

The home goods retailer reported quarterly earnings of $0.33 per share. This was two cents above expectations. Revenues of $2.8 billion were more or less in line with expectations.

Unfortunately, the retailer also reported a 0.6% drop in same-store sales during its first fiscal quarter, even as total retail sales were up 0.4%. Analysts had been expecting a small gain in those comparable sales. The company noted that store sales included strong sales growth from customer-facing digital channels (online) and included sales from stores that declined in the mid-single-digit percentage range.

The company also noted along with news of its dividend and buyback updates that it ended the first quarter with $847 million in cash and investment balances, an increase of approximately $281 million from a year ago.

For guidance, Bed Bath and Beyond issued the following:

The company’s planning assumptions reflect actual results through the fiscal first quarter and the current trends the company has been experiencing.  Based on its planning assumptions, the company continues to model net earnings per diluted share for the full year to be in the low-to-mid $2.00 range.

The company remains on track with its three-year financial goals that comprise its vision for 2020 which include:  to achieve comparable sales growth beginning in fiscal 2018; to achieve moderating declines in  operating profit and net earnings per diluted share in fiscal 2018 and fiscal 2019; and to achieve growth in net earnings per diluted share by fiscal 2020.

Thomson Reuters has a consensus analyst earnings estimate of $2.28 per share for the current fiscal year.

Bed Bath & Beyond shares closed up 0.7% at $20.18 on Wednesday ahead of the report, but they were last seen down almost 5% at $19.18 Thursday morning ahead of the opening bell. The stock has a 52-week trading range of $16.52 to $31.29, and the consensus analyst price target was last seen at $17.94.

Being valued at less than 10 times expected earnings sounds cheap, but in the case of Bed Bath & Beyond that “cheapness” is trumped by slow same-store sales, online and retail competition and ongoing disappointing earnings reports. Sometimes stocks look cheap for a reason.