Bed Bath & Beyond Stock Plunges After Earnings. Here’s Why. - Barron's

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Bed Bath & Beyond missed its targets—and investors fled in droves.

Shares of the embattled retailer were halted in after-hours trading after Wednesday’s close minutes before it reported its fiscal third-quarter results. They plunged as much as 18% after they resumed trading at 4:45 p.m. Eastern time.

And it’s no wonder why.

Bed Bath & Beyond (ticker: BBBY) reported an adjusted loss of 38 cents a share. The Street wanted to see profits of two cents. Sales also fell short of analyst earnings estimates, coming in just under the $2.8 billion analysts expected. And same-store sales plunged 8.3% compared with the year-ago quarter.

Amid reporting its top and bottom line miss, Bed Bath & Beyond also said it was withdrawing its fiscal 2019 guidance as it expected sales and profitability to “remain pressured.”

“Our performance in the third quarter was unsatisfactory and underscores the imperative for change and strengthens our sense of priorities and purpose,” recently appointed CEO Mark Tritton—the former chief merchandising officer at Target (TGT)—said in Wednesday’s announcement.

Bed Bath & Beyond has emerged as somewhat of a battle stock in recent months.The retailer was the target of a trio of activist hedge funds last spring who claimed Bed Bath & Beyond “lost touch with modern retail.” Since then Bed Bath & Beyond revamped its board, trimmed its leadership ranks, and eventually replaced its CEO with Tritton.

Some believe that under the leadership of Tritton, Bed Bath & Beyond can retool and win back customers who abandoned the retailer in favor of Amazon.com (AMZN) and other options.

There are reasons to be optimistic about Tritton. He got to work quickly by shaking up Bed Bath & Beyond’s leadership team last month.

The company also announced a sale-leaseback transaction in which it sold roughly half of its real estate to private-equity shop Oak Street Real Estate Capital, netting roughly $250 million.

The real estate deal was called “a step in the right direction” by Seth Basham, an analyst at Wedbush, in a note Monday.

But others are less optimistic that a turnaround can happen quickly.

“The excitement around a potential turnaround is understandable, but in our view, we see 2020 as a considerable investment year, with continued fundamental challenges and success no guarantee,” Zachary Fadem, a senior analyst at Wells Fargo Securities, wrote in a note Tuesday,

With Wednesday’s results, it appears Bed Bath & Beyond’s management agrees.

“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,” Tritton said.

Bed Bath & Beyond shares, which had closed the trading day down 1.1%, were down 12% in recent after-hours trading, at $14.66.

Write to Carleton English at carleton.english@dowjones.com

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