Loop Capital called Bed Bath & Beyond's Q3 report the worst "since the Great Recession"
Shares of Bed Bath & Beyond (BBBY) were lower on Thursday morning after the company reported third quarter results that an analyst at Loop Capital called the worst "since the Great Recession." In addition to Bed Bath & Beyond's weak report, other retailers - including Kohl's (KSS), L Brands (LB) and J.C. Penney (JCP) - reported same-store sales declines for the crucial holiday period.
BED BATH & BEYOND: On Wednesday after the market close, Bed Bath & Beyond reported a third quarter adjusted loss per share of (38c), well below the 2c profit analysts' expected. Revenue for the quarter of $2.76B was also below the $2.85B consensus. Adjusting for the calendar shift of Thanksgiving, which the company said "significantly impacted" results, Bed Bath & Beyond said same-store sales were down 3.6%. during the five-day shopping period from Thanksgiving to Cyber Monday for both this year and last year. Comparable sales on a shifted basis increased 7.1%, it said. The retailer also withdrew its guidance for fiscal 2019, citing the headwinds reflected in the company's results to date, and the ongoing work by recently appointed President and CEO Mark Tritton to assess the business and finalize the details of the company's go-forward strategic plan, as well as the "extensive" senior leadership changes within the past month.
Tritton said the current quarter would remain "pressured," and called the Q3 results "unsatisfactory." He said the performance "underscores the imperative for change and strengthens our sense of priorities and purpose. We must respond to the challenges we face as a business, including pressured sales and profitability, and reconstruct a modern, durable model for long-term profitable growth." He added that the foundation of the company's transformation is "well underway" and that the company will be finalizing the details of its strategic plan over the next few months.
Loop Capital analyst Anthony Chukumba said the Q3 results were the worst he can remember since the Great Recession, and he believes they highlight the steep uphill climb Tritton faces in turning the company's fortunes around. Given Tritton's strong merchandising and private label background, as well as the company's relatively strong liquidity position, Chukumba said he is willing to be "somewhat patient" as the turnaround unfolds or does not.
KOHL'S: On Thursday, Kohl's reported that its comparable sales for fiscal November and December 2019 combined fell 0.2% over the same period last year. CEO Michelle Gass said that while Kohl's saw momentum in areas like digital, active, beauty and children's, this was offset by softness in women's. Kohl's said it now sees FY19 EPS at the low end of its previously announced guidance range of $4.75-$4.95. This guidance excludes 22c per diluted share related to the extinguishment of debt and impairments, store closing and other costs recognized in the first nine months of 2019.
Following its report, BofA analyst Lorraine Hutchinson downgraded Kohl's to Neutral from Buy, saying she reads the holiday comp decline of 0.2% as suggesting that its new product launches, incremental traffic from the Amazon (AMZN) returns program and investments to drive sales are not enough to offset secular retail headwinds.
J.C. PENNEY AND L BRANDS: J.C. Penney reported that its comparable store sales for the holiday period decreased 7.5%, with the adjusted comp sales decline for the nine-week period ending January 4 was 5.3%. The company reaffirmed its FY19 comp sales decline of 7%-8%, with adjusted SSS declining 5%-6%, and adjusted EBITDA exceeding $475M.
L Brands said its holiday period sales were $3.906B vs. $4.072B last year, with SSS down 3% for the nine-week period. The retailer lowered its Q4 EPS view to about $1.85 vs. previous guidance of about $2.00. against the $1.97 consensus. Jefferies analyst Randal Konik advised investors to "sell now" and lowered his price target to $12 from $14 while maintaining his long-held Underperform rating on the shares. Victoria's Secret comps being down 12% show the brand is worsening and underlying demand is very soft, leading him to conclude that the "brand is becoming irrelevant." Pink comps are "even worse" and the brand is "broken," according to the analyst.
WHAT'S NOTABLE: On Wednesday, Macy's (M) posted a smaller than expected same-store sales decline for the holiday period. The news came as the company prepares to close 29 stores and lay off workers as part of its annual review. Retailers like have been hurt with competition from fast-fashion retailers like H&M and TJ Maxx (TJX), as well as an increase in online shopping on Amazon.com.
PRICE ACTION: In morning trading, shares of Bed Bath & Beyond sunk over 17% to $13.76. Meanwhile, Kohl's fell nearly 8% to $45.61. J.C. Penney declined nearly 7%. In spite of Jefferies' advice, L Brands shares are up 2% to $18.53 in early trade.