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Bed Bath & Beyond Inc. says that supply chain disruptions and labor shortages were so bad during the most recent quarter that it even had trouble getting its printed circulars, a major traffic driver.
“While we’re able to activate additional plans for distribution in October, paper supply and labor issues with print vendors impeded our ability to reach full scaled circulation,” Chief Executive Mark Tritton said on the earnings call, according to a FactSet transcript.
“Timely delivery […] by a vendor was also an issue that prevented the historical levels of circular distribution and further impacted our ability to drive traffic and generate sales.”
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Bed Bath & Beyond
BBBY,
like many other retailers, has been pressured by higher costs and challenges getting merchandise onto store shelves. The company warned after its second-quarter earnings that the holidays could be affected by a medley of problems, including internal missteps.
Despite the difficulties, Tritton says the company was able to course correct in some ways.
“Yet amid somewhat normalized conditions, we converted traffic and met demand successfully, both in-store and online. For example, we delivered a high-single-digit sales comp in the U.S. over the Black Friday to Cyber Monday period,” he said.
“During the quarter, we delivered gross margin of 35.9%, well above our plans, despite sharp increases in inflation and pervasive freight and supply chain cost pressures.”
Going forward, the company will continue to focus on its owned brands, with at least eight launched in 2021.
There will also be less reliance on promotions. Analysts forecast prior to the Thursday earnings announcement that heavy discounting would weigh on results.
“Coupon exclusions, less clearance discounts and event-driven coupons during peak shopping periods are just some of the examples of how we can diversify our value message without being more promotional in totality,” Tritton said.
“Our number one priority is to continue to change our current systems and processes to unlock inventory in a faster and more efficient way to meet demand, above and beyond our mid- to long-term investments to improve our top in-stock positions.”
The company, which has a portfolio that includes the namesake home goods retail chain, BuyBuy Baby and Harmon, reported a surprise fiscal third-quarter loss and sales that missed expectations early Thursday, sending shares down during premarket hours.
The stock has since bounced back, up 8.5% during regular trading hours. Bed Bath & Beyond is a meme stock, in which it and other stocks like GameStop
GME,
swing wildly in value.
“Considering poor results and choppy execution (raising price, cutting circular, etc.), we attribute today’s positive stock reaction to elevated short interest and reiteration of $265M in Q4 buyback,” wrote Wells Fargo in a note following the earnings announcement, recommending that “longs take profits” after the shares rebounded.
“[W]e reiterate our Underweight view, as we believe fundamentals are deteriorating, long-term goals appear aggressive and cash appears to be dwindling into a period of heightened business investment.”
Wells Fargo has a $12 price target on Bed Bath & Beyond shares.
Bed Bath & Beyond shares have sunk 30.1% over the past 12 months while the benchmark S&P 500 index
SPX,
has gained 25.8%.
