Bed, Bath & Beyond (BBBY), typically a solid retail stock, has foreshadowed volatility in the coming months. BBBY already has experienced a sales slump in its stores as consumers struggle to locate what they need. It expects customers to cut back on their spending much more.
The home goods retailer reported a 22% drop in fourth-quarter sales for the period ending March 31st on Wednesday. BBBY stock dropped roughly 1% on Wednesday. The company attributed the decline to several factors, including shipments stranded at ports and continuous supply chain bottlenecks that resulted in significant item shortages.
What more has been revealed, and what should investors keep in mind? Get the full article here.
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In a call with analysts on Wednesday, Gustavo Arnal, BBBY’s chief financial officer, stated, “We’re seeing an emerging uncertainty related to consumer sentiment based on market and retail indicators that show a distinct slowdown in consumer demand.” So far in the current quarter, sales at stores that have been operating for at least a year have dropped 20%. During the call, Arnal stated, “We anticipate many of the operating dynamics we experienced in the fourth quarter, both industrywide and internal, to continue in the first quarter.”
BBBY’s CEO, Mark Tritton, stated that the retailer’s inability to deliver on significant items mentioned in its circulars cost the company roughly $175 million in lost sales. He also noted that the firm is still dealing with high freight and shipping expenses due to ongoing global supply chain issues.
BBBY‘s wedding and infant categories, according to Tritton, are a silver lining. The wedding business is forecasting a boom in 2022, with up to 2.6 million marriages scheduled this year, up from 2.2 million before the pandemic. Not only for brides and grooms but for the whole industry and the businesses that cater to it and rely on it for revenue, a strong year for weddings will be a welcome respite. The disastrous year of 2020 prompted the cancellation or postponement of the bulk of marriages, leaving hundreds of companies reliant on them to struggle to stay afloat.
For wedding registries, BBBY is a popular choice. During the call, Tritton stated that the company’s wedding and baby business is increasing. (The firm also owns the “buybuy Baby” baby store chain.) Tritton added, “I think that we see upward trends in weddings that everyone’s expecting and want to capitalize on. So early indicators through the back end of Q4 bodes well.”
Activist action is also a factor to consider when speculating about BBBY. Ryan Cohen, an activist investor, has taken notice of BBBY and wants to shake things up at the firm. On March 6th, his RC Ventures purchased a roughly 10% interest in BBBY, making it one of the company’s top five shareholders. Cohen has slammed the company’s current strategy and has called for reforms.
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BBBY is trying to execute too many “cumbersome” strategies at once, according to Cohen, who also established the online pet shop Chewy. Instead, BBBY should “narrow its focus” to goals like strengthening its supply chain and inventory mix. He suggested that the firm consider spinning off its buybuy Baby outlets or finding a buyer to take the company private entirely. Cohen recently wrote to the board, stating that BBBY “is struggling to reverse sustained market share losses, stem years-long share price declines and navigate supply chain volatility.” Cohen added that executive remuneration was “outsized” compared to the company’s performance.
BBBYreplied to Cohen’s letter by saying it will “carefully review” it and “hope to engage constructively around the ideas” he presented. On March 25th, the business announced an agreement with Cohen’s firm, RC Ventures, in which three executives will join BBBY’s board of directors as independent directors immediately. According to the statement, a committee will also investigate options for the buybuy Baby chain and provide suggestions to the board. We’ll have to see where it goes from there.
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