Yahoo Finance Bed Bath & Beyond Inc. (BBBY) Stock Tanks on Weak Guidance
Bed Bath & Beyond Inc. (Nasdaq: BBBY) stock fell more than 18 percent on Thursday after the company issued 2018 earnings guidance that came up well short of consensus expectations and left investors questioning the company's ability to navigate a tricky retail environment.
On the surface, Bed Bath & Beyond's fourth quarter really didn't look too bad.
[See: 7 of the Best Dividend Stocks to Buy for 2018.]
The company reported earnings per share of $1.48, topping consensus estimates of $1.41. Fourth-quarter revenue was $3.72 billion, mostly in-line with Wall Street forecasts.
Comparable-store sales were a bright spot as well. Comps declined only 0.6 percent on the quarter compared to consensus estimates of a 2.3 percent decline.
Bed Bath & Beyond even raised its quarterly dividend by a penny to 16 cents per share.
However, the bombshell that rattled investors' confidence was Bed Bath & Beyond's guidance that 2018 full-year EPS will be in the "low-to-mid $2 range." Analysts had expected 2018 EPS of $2.77.
The guidance suggests that Bed Bath & Beyond will continue on a troubling path of declining same-store sales, margins and earnings this year. Same store sales growth has been negative in eight of the past 10 quarters, and gross margins have declined from 41.3 percent in fiscal 2012 to 35.9 percent today.
Things have already gotten pretty bad for Bed Bath and Beyond investors with the stock now down 75.8 percent in the past three years. However, analysts say things could get even worse from here.
Morgan Stanley analyst Simeon Gutman says business is unlikely to improve in 2019 either, predicting consensus 2019 EPS forecast will likely drop to around $2.
"The business' gross profit pools remain under pressure and have declined 500 [basis points] over the last six years," Gutman says. "The sales shift to online is clearly hurting margins, as is the elevated promotional environment."
[See: 7 of the Best Stocks to Buy for 2018.]
KeyBanc analyst Bradley Thomas says long-term investors should remain cautious until Bed Bath & Beyond shows clear signs that its investment efforts are paying off. "We support management's investments in the business, and remain hopeful that they start to benefit the top line," Thomas says.
"Ultimately, we remain concerned that underlying trends could get worse given the rapidly evolving consumer/retail landscape."
Both Morgan Stanley and KeyBanc have "underweight" ratings and $16 price targets for BBBY stock.
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