Bed Bath & Beyond Inc. (Nasdaq:bbBY) shares fell more than 18% on Thursday, as the company’s 2018 earnings guidance is far from consensus, and investors are questioned about the company’s navigation in a harsh retail environment. ability.
On the surface, the fourth quarter of Bed Bath&Beyond does not seem bad.
The company announced earnings per share of $ 1.48, higher than the market expected $ 1.41. The fourth quarter revenue was $3.72 billion, most of which was in line with Wall Street forecasts.
Same store sales are also a bright spot. Comps fell only 0.6% this quarter, and the market is generally expected to drop 2.3%.
Bed Bath & Beyond even increased its quarterly dividend by 1 cent to 16 cents per share.
However, the blockbuster that has caused investor confidence is Bed Bath & Beyond’s guidance that earnings per share for 2018 will be “as low as $2”. Analysts had expected EPS of $2.77 in 2018.
The guidance shows that Bed Bath & Beyond will continue to go down the same-store sales, profit margins and revenue decline this year. In the past 10 quarters, the same-store sales growth rate was negative in 8 quarters, and the gross profit margin decreased from 41.3% in FY2012 to 35.9% today.
For Bed Bath and Beyond investors, the situation has become quite bad. In the past three years, the stock price has dropped by 75.8%. However, analysts say things may get worse from here.
Simeon Gutman, an Morgan Stanley analyst, said that the business is unlikely to improve in 2019 and that the 2019 forecast for earnings per share may drop to around US$2.
Gutman said: “The company’s gross profit reserves are still under pressure and have fallen by 500 basis points in the past six years. “Savings turning online are obviously damaging to profit margins, and so is the upgrade promotion environment. ”KeyBanc analyst Bradley Thomas said that long-term investors should remain cautious until Bed Bath & Beyond shows clear signs that its investment efforts are paying off. “We support management’s investment in the enterprise and still hope they start to benefit from the top line,” said Thomas.
“Ultimately, we are still worried that with the rapid development of the consumer/retail industry, potential trends may become worse.”
Both Morgan Stanley and Key Banc have BBBY stocks with a “low” rating and a $16 price target.