Written by Nicole Goodkind, CNN Business
Retailers usually want their sales numbers to be red, not their customers. But Bed Bath & Beyond is said to be dealing with cold momentum and hot customers in its stores.
A new report from Bank of America claims the company is cutting air conditioning in an effort to cut expenses quickly to offset the decline in sales.
Bed Bath & Beyond told CNN that no changes to store temperature guidelines have come from the companies. “We have been contacted about this report and, to be clear, no Bed Bath & Beyond stores have been directed to modify their air conditioners and there have been no changes in company policy regarding use of the facilities,” a representative said.
However, Bank of America analysts who have visited stores point to growing concerns, including purposefully reduced hours, reduced facilities, reduced store hours and canceled remodeling projects. Rewards programs have also been scaled back and replaced. Analysts expect Bed Bath & Beyond management to soon announce more store closures and halt the opening of Buy Buy Buy Baby stores.
The Bed Bath & Beyond website lists 20 store locations in Massachusetts, and eight in New Hampshire. Stores in Saugus and Holyoke will be closed permanently in 2021.
Meanwhile, fire sales and price cuts are rampant. The company continues to offer high promotions including up to 50% off bedding and furniture, free same-day shipping, $10 off purchases of $30, and 20% off purchases by college students and their parents.
But analysts at Riley Securities don’t see these sales promotions as doing much to help. They dramatically lowered their target price for the retailer’s stock from $17 to $7, citing a drop in store traffic. They said the easing of Covid restrictions meant there was less demand for household goods and supply chain problems had led to a shortage of inventory to attract customers. Analysts note that competitors including Walmart and Target have seen their traffic stay flat, while Bed Bath & Beyond is down 20% to 30% year over year.
The changes come ahead of the first-quarter report on home goods retail sales, due this week, and follow a devastating report in the last quarter when sales fell 22%. Mark Tritton, CEO of Bed Bath & Beyond, said the unavailability of some products due to supply chain flaws resulted in an estimated $175 million in lost sales during the period.
Bank of America analysts believe sales will fall another 20% this quarter.
“The company has underperformed the industry and we believe the estimates are in line.” [of an 18% drop in sales] They may be optimistic.”
Zacks stock research consensus estimate for the retailer’s earnings is now tied for a $1.28 loss per share, down 2,660% from a year ago. Bed Bath & Beyond has a surprising average negative earnings for four quarters of 4,700%, according to the financial research firm.
Another worrying factor for the company is the resignation of two key financial executives in recent months, chief accounting officer John Parisi resigned in May, and Heather Plotino, senior vice president of financial planning, analysis and commercial finance, has left the company.
Sell Brand Purchases Buy Buy Bank of America analysts said a baby appears less likely. Active investor RC Ventures, which owns approximately 10% of Bed Bath & Beyond, called for a sale of the brand earlier this year, and buyers expressed interest. However, analysts do not believe that interest can withstand the recent downturns. “We continue to see challenges in closing a deal given BBBY’s deteriorating financial position and increasing high yield margins,” they wrote.
Analysts at Riley Securities said they believe a sale or split of the company could unlock between $1.5 billion and $2 billion in value, but they no longer believe a sale is imminent as business dries up.
Analysts said that although the retailer will likely suffer a few more quarters of ongoing pain, there is still hope.
Triton took over as CEO of the home goods business after leaving his job as chief merchant of Target in November 2019 and quickly put together a massive turnaround plan.
He announced an important roadmap for store closings, cleaned up the third batch and led divestitures from companies like Christmas Tree Shops and Cost Plus World Market. The company said it will spend about $250 million to redesign about 450 Bed Bath & Beyond stores to make in-store shopping easier and more accessible for merchandise.
“The shift is taking longer than expected to pay off due to supply chain challenges and ushering in a more challenging retail operating environment,” wrote Riley Securities analysts, but we believe Bed, Bath & Beyond is heading in the right direction.