Bed Bath & Beyond Q3 Earnings Preview: What To Expect
Bed Bath & Beyond (NASDAQ:BBBY) is scheduled to announce its third quarter results on Wednesday, December 21. The company started the year on a weak note, as both revenue and earnings per share missed analyst estimates for two straight quarters in 2016, primarily due to increased technology-related expenses, higher compensation costs and a fall in the company’s comparable sales. In Q2, the retailer reported a marginal decline in revenue to $2.99 billion, and also posted diluted earnings of $1.11 per share, which declined 8% year over year (y-o-y). In the first half of 2016, Bed Bath & Beyond reported more than a 20% increase in its comparable sales growth from customer-facing digital channels over the corresponding period in the prior year. However, this increase was not able to offset the the company’s declining foot traffic from its physical stores, and as a result its comparable store sales declined in the low single digit percentage range in 2016 so far. We expect this trend to continue in the third quarter as well.
Recent Initiatives To Grow Store Traffic
Amid declining comparable sales, Bed Bath & Beyond needs to take steps to grow its store traffic. In the most recent quarter, Bed Bath & Beyond started testing a new membership program where members will get a 20% discount on all purchases, after paying an annual subscription fee of $29. [1] This paid subscription could help the company generate other streams of revenue, increase customer loyalty, improve margins and better compete with Amazon’s Prime membership program.
In addition, the retailer is reportedly going to serve wine and beer to its customers at its new 120,000 square foot store with a restaurant in Brooklyn. [2] A restaurant within a department store could improve the shopping experience, engage more consumers and consequently increase revenues for Bed Bath & Beyond going forward, if it is rolled out on a larger scale.
Improving Digital Presence
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Bed Bath & Beyond has started taking initiatives in its digital expansion to offset the declining foot traffic. To that end, the retailer acquired PersonalizationMall.com (PMall.com), an online retailer of personalized products, in November for approximately $190 million in cash. With this acquisition, the company intends to grow its product personalization category and bring a complementary portfolio of differentiated products to its catalog, in addition to boosting its online sales. This, coupled with the June purchase of One Kings Lane, could help the company improve its digital capabilities in the near future.
Future Outlook
Reuters’ compiled analyst estimates forecast revenues of $3 billion and earnings of 99 cents per share for Q3 2016, implying growth of about 2% and (9)%, respectively. For full year 2016, the company continues to forecast its earnings per diluted share in the range of $4.5 to $5.0.
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Notes:- Bed Bath Tries to Move Beyond the Coupon, fortune.com, Oct 2016 [↩]
- Bed, Bath & Beyond to create in-store buzz with beer and wine in new Brooklyn store, bizjournals.com, Nov 2016 [↩]