Disappointing sales have dropped the share price for home furnishing retailer Bed Bath & Beyond to what could be the company’s biggest drop in its history.
Shares of Bed Bath & Beyond Inc. (Nasdaq: BBBY) fell more than 26% in Wednesday morning trading as the company reported weaker sales and a longer-than-anticipated turnaround.
Its same-store sales decreased by 5.4% in the first two months of its 2019 fourth quarter thanks to sluggish store traffic.
The company said its Cyber Monday sales were down 13% from the same period a year ago. It also reported a decline in its gross margin by 300 basis points.
“We are experiencing short-term pain in our efforts to stabilize the business, including the pressures of store traffic trends coupled with our own executional challenges,” company CEO Mark Tritton said.
Tritton was brought in to run Bed Bath and Beyond from Target Corp. (NYSE: TGT) in hopes of reversing the company’s fortunes. In the three years before Tritton took over, the chain experienced slumping sales and a steady fall in its share price.
From its high of $71 per share in December 2013, Bed Bath and Beyond shares have dropped more than 84%.
In December 2019, Tritton made the bold move to remove six senior executives right in the middle of the holiday season.
Analysts at Tesley Advisory Group said consumers have not responded to Bed Bath & Beyond products and pricing as anticipated. Tesley lowered its price target from $18 to $15. Other brokerages trimmed their price target for the company even further to as low as $10 per share.
Only five out of 18 Wall Street brokerages rate Bed Bath & Beyond’s stock a “buy” or higher while 10 rate it “hold” and three have it as a “sell”.
“Tritton has a more difficult job ahead than we anticipated and more aggressive changes are needed. We are disappointed with the large step back in the business,” Telsey analysts wrote in a note.
The sluggish sales announcement led to Refinitiv’s fourth-quarter SmartEstimate earnings expectation for Bed Bach & Beyond to drop to $0.20 per share Wednesday. It was $1.05 per share to start the week.
“Looking ahead, competition remains intense from both online and physical retailers, and it will take significant work to reposition the business to remain viable,” KeyBanc Capital Markets analyst Bradley Thomas said.
Tritton was still optimistic that the company could reverse course by modernizing the business and making changes to merchandising, pricing and promotion. He added that the change in trajectory “will take time.”
“As we take steps to position Bed Bath & Beyond to deliver long-term sustainable growth, we are fast-tracking our efforts to rebalance our portfolio, reset our cost structure, and enhance our leadership and talent,” Tritton said.
Bed Bath & Beyond will report its full fourth-quarter and yearly results after the market closes on April 15, 2020.