Bed Bath & Beyond showed a loss in the second quarter as COVID-19 and marketing missteps hurt it as well as supply chain and cost issues.
The company posted a net loss of $73.2 million, or 72 cents per diluted share, versus net income of $217.9 million, or $1.75 per diluted share, in the year-prior period. Adjusted for one-time events, net income was $3.7 million, or four cents per diluted share, versus $62.3 million, or 50 cents per diluted share, in the quarter a year earlier.
An analyst average estimate published by MarketBeat called for adjusted diluted earnings per share of 52 cents.
Comparable store sales, adjusted to balance effects of the COVID-19 pandemic and the Bed, Bath & Beyond fleet optimization program, slipped by 1%.
Net sales for the quarter were $1.98 billion versus $2.69 billion in the year-earlier period. Operating loss was $84.1 million versus a $270.5 million operating profit in the quarter a year previous.
In a conference call, Mark Tritton, Bed Bath & Beyond’s president and CEO blamed the soft numbers largely on the effects of the COVID-19 Delta variant surge. After several consecutive quarters of delivering positive results from the company’s strategic plans, he said, macroeconomic forces and internal execution factors had tripped up progress.
After experiencing growth in June, Bed, Bath & Beyond began to experience an unexpected revenue shift, and, in August, the final and biggest sales month of the second quarter, traffic slowed, and revenues did not materialize as expected. The resurgence of COVID-19 cases and growing Delta variant fears created a volatile environment especially in large southern states, such as Florida and Texas, as well as California, which, in aggregate, represent approximately 30% of company total sales, Tritton said.
From the internal perspective, he said, Bed Bath & Beyond shifted too many marketing resources online and into social media while reducing the distribution of printed circulars, which remain critical traffic drivers for the company. Tritton added that the company had combined brand and digital teams, and has begun correcting course to rectify the issues that have arisen.
It’s noteworthy that, as August ended, Bed Bath & Beyond announced that Cindy Davis had stepped down from her positions as evp, chief brand officer and president of Decorist, and that Rafeh Masood, evp and chief digital officer, had been appointed interim chief brand officer
In announcing the financial results, Tritton said, beyond the direct coronavirus impact on the quarter, “unprecedented supply chain challenges have been impacting the industry pervasively, and we saw steeper cost inflation escalating by month, especially later in the quarter, beyond the significant increases that we had already anticipated. This outpaced our plans to offset these headwinds. These factors impacted sales and gross margin.”
In announcing the financial results, Tritton said, beyond the direct coronavirus impact on the quarter, “unprecedented supply chain challenges have been impacting the industry pervasively, and we saw steeper cost inflation escalating by month, especially later in the quarter, beyond the significant increases that we had already anticipated. This outpaced our plans to offset these headwinds. These factors impacted sales and gross margin.”
Tritton asserted that Bed Bath & Beyond continues to make progress against the fundamentals of its three-year transformation strategy.
“Our buybuy BABY banner continued to build on its positive momentum from the past several quarters, growing double digits due to strength in apparel and travel gear and increasing market share for the period,” he said. “We also celebrated the July re-opening of our Bed Bath & Beyond banner’s NYC flagship store in Chelsea as part of our comprehensive store remodel program, which is exceeding our expectations. Our higher margin-owned brands are outperforming our penetration goals across the overall chain, and even stronger in remodeled stores. As a group, we continued to leverage our enhanced digital channel, with significant growth above 2019 at nearly double the proportion of sales. Operationally, we entered the next phase of our supply chain modernization through our partnership with Ryder which is instrumental to our strategy. We are committed to executing over the short, mid and long term, especially during these early stages of our multi-year plan.”
Tritton declared that Bed Bath & Beyond’s financial foundation remains solid.
“We generated positive operating cash flow during the quarter,” he said. “Our cash balance, coupled with our recently amended asset-based revolving credit facility, provides us on-going capital and liquidity strength of $2.0 billion. We are well-positioned to continue our planned investments in our business and pave the way towards a more profitable future. We have the plan, the team and the resources to unlock our potential.”
