Bed Bath & Beyond (NYSE: BBBY) shares are down more than 55% following the company's fiscal Q2 earnings report as the company missed expectations on the top and bottom lines. It continues a bleak year for the company with shares down 65% YTD as it's given back nearly all of its gains since the mania in meme stocks.
In essence, there was a perfect storm of macro developments and positive catalysts that sent shares soaring higher, but these have now abated. Instead, the company faces nearly the inverse situation as its losing money, a weak housing market means that people are spending less money on home goods, and higher rates and a crashing stock will make it more expensive and difficult to raise capital. Further, the company's fiscal Q2 results make it clear that its turnaround plan is not significant enough to change the company's momentum as it experienced a 28% decline in revenue.
Inside the Numbers
In its fiscal Q2, Bed Bath & Beyond reported an adjusted loss of $3.22 per share which was much worse than analysts' expectations of a loss of $1.85 per share. Revenue also missed expectations at $1.44 billion vs expectations of $1.47 billion.
This was a 28% decline compared to last year, while the company had a $366 million loss for the quarter, compared to a $72 million profit. Same-store sales were down 26%.
Despite these headwinds, the company reiterated its full-year outlook, seeing a 20% decline in revenue and a strong holiday season. Management also believes that its turnaround efforts should bear fruit as it adjusts its merchandising strategy to have less cluttered stores and increases investment in its Buybuy Baby chain which has been a bright spot for the company.
It's also looking to reduce costs by shuttering 150 underperforming stores and reducing staff. It's also dealing with an inventory overhand like so many retailers. The company plans to aggressively discount these items. Overall, it sees costs declining by about $250 million in the second half of the year vs the first half.
Management also seems confident that it has sufficient liquidity to get through the turnaround due to getting about $500 million in financing through loans and stock sales. However, the company is currently led by an interim CEO and CFO, so it's difficult for investors to gauge the company's commitment to these plans.