Bed Bath & Beyond Inc. is still struggling in an otherwise thriving home-goods retail sector for a variety of reasons laid out by analysts, with shares of the company plummeting 19.5% in Thursday trading.
The company, with merchandise across décor, furnishings, and more, reported a same-store sales decline of 0.6% for the fourth-quarter though earnings and sales exceeded expectations.
The company expects full-year earnings per share in the low-to-mid $2.00 range. The FactSet consensus is $2.44.
Retail generally, and the home category specifically, have been doing well, said Neil Saunders, managing director of GlobalData Retail in his latest note. But Bed Bath & Beyond BBBY, -19.95% hasn’t been able to capitalize, even when there’s an extra week in the quarter.
“Too many of Bed Bath & Beyond’s stores – especially older ones – are a mess,” he wrote, saying the stores are “crammed” and “devoid of inspiration,” making them “sometimes unpleasant to shop.”
Other issues include service, “which, in some locations, leaves a lot to be desired” due to long lines and difficulties finding sales associates when needed. Some customers are going online instead, but that’s less profitable because of free shipping.
“We recognize that the company is making progress with newer stores and that it is pushing services like wedding lists,” Saunders said. “However, it needs to improve operational discipline and execution if it is to turn the tide of poor performance.”
Bed Bath & Beyond was downgraded at Raymond James to underperform from market perform based on the cost of all of the initiatives the company has planned, from investments in technology to new store concepts, which will continue to weigh on operating profits.
“Despite the array of initiatives, a key issue for us is that the fleet of 1,000-plus legacy Bed Bath & Beyond stores continue to deliver in-store and mid-single-digit comp sales declines,” analysts led by Budd Bugatch wrote. “We are old school, and it is ‘Beyond’ us that management’s initiatives did not cite a remodeling of its flagship store base that we find increasingly unattractive due to being dated, cluttered and crowded.”
A number of analysts also cut Bed Bath & Beyond’s price target citing margin pressure.
“With the competition only getting better and spending more, the read-through is negative to home furnishings retailers without significant brand-driven pricing power including Williams-Sonoma and Pier 1 Imports,” wrote Wedbush in a note.
Analysts rate Bed Bath & Beyond shares neutral and cut their price target to $18 from $23.
J.P. Morgan analysts think Bed Bath & Beyond’s same-store sales result is “particularly disappointing” considering the upbeat landscape.
“In our view, it appears that everything is ‘being thrown against the wall’ with hope that a few things will stick,” analysts wrote in a note maintaining their underweight stock rating and cutting the price target to $16 from $18.
Credit Suisse and KeyBanc Capital Markets analysts also cut their price targets to $20 and $16 respectively.
Bed Bath & Beyond shares are down 55% for the past year while the S&P 500 index SPX, +0.83% is up 13.7% for the period.