Bed Bath & Beyond Q4 preview: Where next for BBBY stock?

When will Bed Bath & Beyond release Q4 earnings?

Bed Bath & Beyond will release fourth quarter earnings before US markets open on Wednesday April 13.

Bed Bath & Beyond Q4 earnings preview

There is a lot happening at Bed Bath & Beyond right now. Chief executive Mark Tritton is spearheading a turnaround plan aimed at stemming three consecutive years of lower sales that has pushed the company into the red. The plan aims to refresh successful stores, close down failing ones, boost its online presence and introduce more private labels to its shelves. The company has recently added a new supporter in the form of Ryan Cohen, the founder of online pet food store Chewy and the chairman leading the turnaround at video games retailer GameStop, which is also trying to reposition itself to ensure it is fit for the digital age.

Cohen purchased a 9.8% stake in Bed Bath & Beyond last month through his vehicle named RC Ventures. That prompted Bed Bath & Beyond to appoint three directors from RC Ventures – Marjorie Bowen, Shelly Lombard and Ben Rosenzweig – to its board as independent directors to help bring expertise to the business. In addition, Bowen and Rosenzweig have joined a new Strategy Committee alongside two existing independent directors – Sue Gove and Andrea Weiss – in order to explore ‘alternatives to unlock greater value from the company's buybuy BABY banner.’

Those appointments were made just weeks after Bed Bath & Beyond added Minesh Shah, who was chief operations officer at online personal styling service Stitch Fix, as a director and appointed new leaders for its branding and digital marketing ambitions. Mark Danzig, who has previously worked on marketing matters at Walmart, was appointed senior vice president of creative while Umesh Sripad, who joined from Swedish furniture giant IKEA, was appointed as senior vice president of digital.

Bed Bath & Beyond missed expectations in the last quarter after disappointing the markets by announcing a lack of inventory caused by supply chain bottlenecks cost the company around $100 million, forcing it to cut its expectations for the full year. It admitted that its sales momentum was ‘not where we wanted it to be’ as a result. The fact it said these issues got worse in December suggests things remained tough as it entered 2022 and implies it will be yet another difficult quarter when it releases results covering the three months to the end of February, threatening to disrupt its turnaround strategy.

Wall Street forecasts Bed Bath & Beyond will see revenue decline 20% to $2.08 billion in the fourth quarter from the $2.69 billion reported the year before. That would be broadly in-line with the $2.1 billion target set by the company.

Analysts are expecting adjusted Ebitda to fall 45% to $92.4 million from $167.9 million the year before and for adjusted EPS to plunge 71% to $0.12 from $0.40. That would be at the upper-end of the company’s targets to deliver $80 million to $100 million in adjusted Ebitda and EPS of between breakeven and $0.15.

For the annual results, it is expected to be the fourth consecutive year of lower sales with Bed Bath & Beyond aiming to deliver net sales of around $7.9 billion (versus $9.2 billion the year before). And, while it will remain in the red its per share performance is set to be somewhere in the region of a $0.15 loss to breakeven compared to the $1.01 loss seen last year.

On the brighter side, it is important to remember the company is pursuing a multi-year turnaround plan and that it has already made good progress in several areas. Its loyalty programme continues to grow at near-record rates and its buybuy BABY stores have been delivering strong double-digit growth after being transformed by the company. The company recently launched its new online experience with the largest grocer in the US, Kroger, to offer its array of home, baby and wellness products to those shopping for food online.

Plus, while Bed Bath & Beyond is battling against inflationary pressure, it has been passing these onto customers using ‘market-driven pricing’ and its growing portfolio of its own brands is also supporting margins compared to the lower profitability on offer selling third-party goods. While its gross margin has wavered between 32% to 35% this fiscal year, this remains above 2019 and 2020 levels. It is also continuing to find costs to strip-out of the business and is aiming to deliver another $100 million of annualised cost-savings going forward by closing down its worst-performing stores, reducing fixed costs and exploring other ‘discretionary savings opportunities’. Notably, the company has also been returning cash to shareholders through buybacks at a much faster rate than originally anticipated despite the huge turnaround plan.

The outlook for the new financial year will be closely-watched given the challenging environment plagued by rising costs and supply chain problems. Analysts currently believe Bed Bath & Beyond will suffer another fall in revenue in the year to the end of February 2023 of around 1.6% to $7.8 billion but will return to profit with estimates pointing toward EPS of $0.66 – which, if achieved, would be the best performance on record since the start of the pandemic. For the first quarter, analysts forecast revenue will fall 6.5% year-on-year to $1.8 billion and that it will eke out EPS of $0.03, suggesting markets think it will be a tough start to the year but are expecting things to improve as the months go by.

Where next for BBBY stock?

Bed Bath & Beyond shares more than doubled in value during the month of March following a sharp uptrend that started after the stock hit an 18-month low in late February. However, having breached the $28 mark for the first time in six months, the stock has experienced a reversal and started to see its share price come under pressure, with shares currently trading just below the $20 mark.

The stock is currently squeezed between the 50-day sma at $19 and the 200-day sma at $21. A move below the short-term moving average would open the door to the 100-day sma at $18 and then to sub-$16. Although the RSI is in bearish territory to suggest shares could fall further, the fact trading volumes over the past five days is less than half the 10-day average and dramatically lower than the 100-day average suggests the current downtrend that started late last month could already be running out of steam. Still, if those levels fail to hold then the 18-month low of $12.42, which has been tested on several occasions this year, should be regarded as the ultimate floor going forward.

Notably, the 19 brokers that cover the stock currently believe Bed Bath & Beyond is overvalued with the average target price of $15.65 sitting some 32% below the current share price.

If shares can recapture the 200-day sma at $21 it will be able to target $23 before eyeing the 2022-high of $30. The fact the 50-day sma has recently recovered back above the 100-day sma is a bullish sign for the stock, although the short-term moving average moving back above the 200-day sma would provide a stronger signal.

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