Beleaguered retailer Bed Bath & Beyond (BBBY) is extending what has been a long term losing pattern for investors on Thursday morning.
Shares of the Union, New Jersey-based retailer of domestic products slid over 4% in pre-market trading, extending losses since early April to near 45% as the company pursues a restructuring plan. The stock has been halved in the past year and, worse yet, longer term investors over the five year period have lost more than 80% of their investment.
The latest for the laggard comes after a report for the three months ending on June 1 that came in at 12 cents per share, down 68.4% from the same period last year but four cents ahead of the Street consensus forecast. Net revenues fell 6.6% to $2.6 billion and essentially matched analysts' forecasts.
The real sticking point for the market is the very bearish signal in same store sales, which tumbled 6.6%, well beyond the 3.8% decline expected by analysts on Wall Street.
"It is clear that the company has not kept pace with how the customer has evolved and how consumers shop today," interim CEO Mary Winston told investors on a conference call late Wednesday highlighting the stunning decline. "We need to give our customers a reason to keep shopping in our brick-and-mortar stores, and in order to do that we must update and enhance store experience."
In order to right the ship, the retailer said it will set near-term priorities of stabilizing and driving top line growth, resetting its cost structure and reviewing its asset base and reorganizing the business structure. With those in place, the company said it expects full year targets to be at the lower end of previous guidance, which had forecast net sales of $11.4 billion to $11.7 billion, and diluted earnings in the range of $2.11 to $2.20 per share.
The outlook that remained within guidance range initially boosted shares higher until investors had time to parse the full print.
"As I evaluate and assess the work underway, my early observations revealed that our number one priority must be a focus on stabilizing our top line and optimizing our sales opportunity," Winston explained. "This will require collaboration and refinement of initiatives across multiple areas of the business, including merchandising, marketing, branding, pricing and supply chain."
"And as I mentioned, we will also be sharpening our focus on delivering a seamless omnichannel experience, including our current in-store and digital experiences," she added. "To be clear, our efforts will be focused on opportunities to drive profitable sales growth."
Despite the restructuring plan advocated by activist investors like Legion Partners, Macellum Advisors and Ancora Advisors underway and a CEO search in process, analysts worry that the company has simply fallen too far behind competitors like Amazon (AMZN) and Target (TGT) at this point.
"The Sell rating on BBBY is based more on secular concerns as the company continues to face intense competition from many different retailers that have better value messaging as well as more optionality for delivery," Goldman Sachs analyst Kate McShane said. "Although the multiple has pulled back significantly and activists are now involved, we think the hurdle to turn the company around is high."
The firm highlighted Bed Bath & Beyond as a top sell idea.
Many investors appear to be listening, as the short interest as a percentage of the company's float is nearly 50%, indicating at least one winner from the company's woes.
While the consensus rating in the analyst community remains a "Hold", even more optimistic investors are eager for more progress on the plan that activists have put in place.
"We'd like to see stabilization in trends before getting more constructive," Jefferies analyst Jonathan Matuszewski said. "Initiatives are in-motion, but progress off a larger base is needed."
"We see a high likelihood of the activists' agenda playing out in terms of sourcing, private label, SKU rationalization, and potential divestitures," he added. "That said, we still think it's premature to buy shares given no real evidence of an inflection in fundamentals."
For Jim Cramer's thoughts on the Bed Bath's quarter, click here.
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