Bed Bath & Beyond Inc. (ticker: BBBY) stock plummeted more than 10 percent on Friday to new seven-year lows after the company’s first-quarter earnings report revealed the retailer continues struggling to adapt to the digital era.
Bed Bath & Beyond reported first-quarter earnings per share of 53 cents on revenue of $2.7 billion. Both numbers missed consensus Wall Street expectations of 66 cents and $2.79 billion, respectively. Comparable-store sales declined by 2 percent in the first quarter, well below the 0.3 percent increase analysts were expecting.
In a statement, the company plays down the weak quarter, saying that the first quarter of the year is “typically the least impactful quarter in terms of annual sales and earnings.” However, Bed Bath & Beyond did little to reassure investors concerned about the outlook for the remainder of the year. The company said “it remains to be seen” whether its first-quarter challenges were unique to quarter. Management also opted not to update its full-year guidance.
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The initial market reaction suggests BBBY’s previous full-year guidance from April may be at risk.
“While management commented that sales have improved in June, we believe the company will likely lower its 2017 guidance range when it next reports in September,” BTIG analyst Alan Rifkin says. “Store traffic has softened as [management] acknowledged the reality of today’s retail landscape where the customer has more choices than ever.”
Despite its negative business trends, Bed Bath & Beyond now trades at a forward price-earnings ratio of 6.5, suggesting the stock could be a compelling long-term value play if the company can get back on the right track. Unfortunately, after a disappointing first quarter, investors shouldn’t expect business to turn on a dime.
“We are hard-pressed to envision a quick turn in BBBY fundamentals,” Oppenheimer analyst Brian Nagel says. “We do, however, look very favorably on a depressed valuation and substantial cash flow and believe that an impeccable balance sheet affords the company time and flexibility.”
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Oppenheimer maintains a “perform” rating on Bed Bath & Beyond stock, while BTIG continues a “neutral” rating.
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Bed Bath & Beyond Inc (BBBY) Is the Latest E-Commerce Victim originally appeared on usnews.com
