Shower beds and more on Wednesday reported a surprising loss for the holiday quarter, as the company ran out of inventory and struggled to get goods out of congested ports and onto shelves.
Shares fell more than 3% in pre-market trading.
CEO Mark Tritton said the out-of-stock cost the company about $175 million in revenue in the fiscal fourth quarter. This is higher than the previous quarter, when the supply chain was congested cost the company about $100 million.
Tritton said in an interview with CNBC that the home goods retailer was disappointed with its results. He said “major setbacks in the macro environment” have slowed the company’s efforts to turn the tide. For example, moving goods will cost more, he said, and some of the best-selling items from national brands are in short supply due to a lack of components like the microchips that go into vacuums. . Plus, he says, much of their seasonal cargo gets stuck at ports and arrives late.
He said a number of challenges have occurred in the current quarter.
Still, says Tritton, Bed Bath is making progress with its transformation. He said it is remodeling stores, investing in technology, welcoming customers back with targeted postcards and emails, and expanding its more profitable private label business.
Bed Bath has had a bumpy ride, like Target Veteran Tritton has sought to refresh the retailer’s brand by launching private label products, remodeling stores and closing underperforming locations. Its stock was attracted to meme-stock rallies along with AMC Entertainment and GameStop. It has also come under pressure from investors – including activist Ryan Cohen, president of GameStop and founder of Tough.
Retailers recently reached an agreement with Cohen’s company, RC Ventures, by agreeing to add a new board member and figure out whether it should spin off or sell its MuaBuy Baby business, which has been one of the company’s bright spots .
Bed Bath on Wednesday did not give a specific forecast, but said it expected revenue and profit margins to improve in the second half of the upcoming financial year, as supply chain conditions ease.
Here’s how the retailer did in the three-month period ending February 26 compared to what analysts had predicted, based on Refinitiv data:
- Loss per share: 92 cents vs expected profit of 3 cents
- Revenue: $2.05 billion vs. $2.07 billion expected
The company’s net loss increased to $159 million, or $1.79 per share, from net income of $9 million, or 8 cents a share, a year earlier. Excluding disposable items, it lost 92 cents a share. Analysts surveyed by Refinitiv had expected earnings per share of 3 cents.
Revenue fell 22% to $2.05 billion from $2.62 billion a year earlier. This is lower than the estimate of $2.07 billion.
Same-store sales, a key retail metric, fell 12% in Bed Bath’s business year-on-year. Same-store sales were down 15% for the Bed Bath & Beyond banner and up in the low digits for the MuaBuy Baby banner.
Digital sales fell 18% year-on-year, reflecting in part a shift back to stores and normalization of e-commerce levels.
Tritton says Bed Bath is undergoing a complete overhaul of its supply chain so that it can better manage all of its goods as it arrives and moves them to its distribution centers and stores. He said the technology, which acts like “a virtual control tower,” will go live later this month. Those efforts are already underway, but are becoming more urgent, he said.
“The moment of these pressures and the moment of strategy completion is the point of friction,” he said.
Along with making rotation efforts, Bed Bath has to compete for shoppers’ dollars when inflation is at a low. about four decades high. Consumers are also weighing other spending priorities, such as summer vacations and spring wardrobes, that may direct their attention outside of their home.
Tritton said the situation is tougher for the retailer, especially since households no longer get extra dollars from the government like child tax credits. “That is reducing overall demand for a number of categories, including housing,” he said.
“We think there’s been a home market that’s always been green, there’s been some ups and downs, and when it’s normalized, we think it needs to be a great business,” he said. “We’re a part of our customers’ lives and their wants and needs and to make sure we’re always in stock and serving that need is our main agenda.”
As of late Tuesday, Bed Bath shares are up about 23% so far this year. The retailer’s stock closed at $17.97 on Tuesday, fell 6.75%, bringing its market value to $1.73 billion.
