Bed Bath & Beyond (NASDAQ: BBBY) reported first-quarter results on June 22. The home furnishings retailer's profits are suffering as consumers increasingly shift their shopping online.
Bed Bath & Beyond results: The raw numbers
Continue Reading Below
What happened with Bed Bath & Beyond this quarter?
Net sales were flat year over year at $2.7 billion. Despite continued growth of more than 20% in its digital channels, Bed Bath & Beyond's comparable sales fell 2%. Like many primarily brick-and-mortar retailers, the home goods giant continues to struggle with declining traffic in its stores, and comparable-store sales decreasing in the "mid-single-digit percentage range."
Moreover, Bed Bath & Beyond's profit margins remain under pressure. Gross margin fell to 36.5% from 37.4% in the year-ago quarter, primarily due to higher shipping costs related to the company's decision to lower its free shipping threshold to $29 from its previous level of $49, as well as higher coupon expense. And operating margin -- which was further dented by higher advertising, payroll, and technology costs -- declined to 5.3% from 7.8%.
All told, net earnings plunged 39% to $75 million, while earnings per share -- which were helped somewhat by the $127 million in share buybacks Bed Bath & Beyond conducted during the first quarter -- fell 34% to $0.80.
Management chose not to update its 2017 full-year guidance, but did suggest that if the "softness" in store traffic and increased promotional expenses the company experienced in the first quarter continue, it's possible that it will need to update its full-year financial forecast after the second quarter.
During a conference call with analysts, CEO Steven Temares also noted that Bed Bath & Beyond has slowed the pace of its store openings and increased the number of store closings in light of deteriorating brick-and-mortar store traffic trends.
Still, management remains optimistic that Bed Bath & Beyond can adapt to these challenges.
"As the retail environment evolves, we continue to actively transform many aspects of our business to reflect these changes," Temares said. "While we work to grow our bottom line and improve our market capitalization, our ongoing investments and efforts have allowed us to create and maintain a strong balance sheet and produce some of the best returns in retail. This is a powerful combination that allows us to take advantage of external opportunities and to make internal structural changes that will better position us to continued success in this rapidly changing period in retail."
10 stocks we like better than Bed Bath & BeyondWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Bed Bath & Beyond wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of June 5, 2017