Retailers generally want their sales numbers red, not their customers. But Bed Bath & Beyond (BBBY) is reportedly dealing with chilled momentum and eager customers in its stores.
A new report from Bank of America claims the company has reduced air conditioning in an effort to quickly cut expenses to offset a drop in sales.
Bed Bath & Beyond told CNN that any changes in store temperature guidelines were not from the company. “We have been contacted about this report, and to be clear, no Bed Bath & Beyond stores have been asked to adjust their air conditioning and there have been no changes in company policy regarding air conditioning. ‘use of public services,’ a representative said.
Still, Bank of America analysts who have made store visits report growing concerns, including work hours that have been dramatically reduced, reduced utilities, reduced store hours and renovation plans. cancelled. Rewards programs have also been reduced and replaced. Analysts expect Bed Bath & Beyond management to soon announce further store closures and halt openings at its Buy Buy Baby stores.
Meanwhile, clearance sales and price reductions are rampant. The company continues to offer high promotions, including up to 50% off bedding and furniture, free same-day delivery, $10 off a $30 purchase, and 20% off purchases. students and their parents.
But analysts at Riley Securities don’t see these sales promotions doing much to help. They significantly lowered their price target for the retailer’s stock from $17 to $7, citing a decrease in store traffic. An easing of Covid restrictions means lower demand for household products and supply chain issues have led to a lack of inventory to attract customers, they said. Competitors including Walmart and Target have seen their traffic hold steady, analysts noted, while Bed Bath & Beyond is down 20% to 30% year-over-year.
The changes come ahead of the home goods retailer’s first-quarter report, due out this week, and follow a devastating report last quarter when sales fell 22%. Bed Bath & Beyond CEO Mark Tritton said unavailability of certain products caused by supply chain issues resulted in lost sales of approximately $175 million during the period.
Bank of America analysts estimate sales will drop another 20% this quarter.
“The company has underperformed the industry and we believe consensus estimates [of an 18% drop in sales] can be optimistic,” they wrote.
Zacks Equity Research’s consensus estimate for the retailer’s earnings is now set at a loss of $1.28 per share, down 2,660% from a year ago. Bed Bath & Beyond has an average negative surprise of 4,700% over the past four quarters, according to the financial research firm.
Other troubling factors for the company include the resignation of two key finance executives in recent months, chief accounting officer John Barresi resigned in May and Heather Plutino, senior vice president of financial planning and analysis. and commercial finance also left the company.
A sale of the Buy Buy derivative brand Baby also seems less likely, Bank of America analysts said. Activist investor RC Ventures, which has a nearly 10% stake in Bed Bath & Beyond, advocated selling the brand earlier this year and buyers have shown interest. However, analysts don’t think interest can withstand these latest downturns. “We continue to see challenges closing a deal given BBBY’s deteriorating financial condition and rising high yield spreads,” they wrote.
Analysts at Riley Securities said they believe selling or splitting the business could have unlocked $1.5 billion to $2 billion in value, but they no longer believe a sale is imminent as the business is drying up.
Although the retailer will likely suffer a few more quarters of sustained pain, there is still hope, analysts said.
Tritton took over as CEO of the homewares business after stepping down as Chief Commercial Officer of Target in November 2019 and quickly put in place a massive turnaround plan.
He announced a major roadmap for closing stores, cleaning up the C-suite and leading divestitures of businesses such as Christmas Tree Shops and Cost Plus World Market. The company said it will spend about $250 million to revamp about 450 Bed Bath & Beyond stores to make in-store shopping easier and products more accessible.
“The turnaround is taking longer than expected to materialize due to supply chain challenges and entering a more challenging retail operating environment,” Riley Securities analysts wrote, but “we believe that Bed, Bath & Beyond is heading in the right direction”.