Bed Bath & Beyond Plunges To New Lows After Earnings: Here's What The Street Is Saying

Bed Bath & Beyond Inc. BBBY reported Wednesday fiscal first-quarter results, which sent the stock tumbling to its lowest level in over a decade. Here is a summary of how some of the Street's top analysts reacted to the print and management's guidance.

The Analysts

Wedbush's Seth Basham maintains a Neutral rating on Bed Bath & Beyond with a $14 price target.

UBS' Michael Lasser maintains at Neutral, price target lowered from $18 to $13.

Baird's Peter Benedict maintains at Neutral, price target lowered from $18 to $13.

Wells Fargo's Zachary Fadem maintains at Underperform, price target lowered from $15 to $10.

Guggenheim's Steven Forbes maintains at Neutral, no price target.

Shares of Bed Bath & Beyond hit a new multi-year low of $10.43 Thursday morning. The stock traded down 6.7% to $10.75 at time of publication.

Wedbush: 'Tough Quarter'

Bed Bath & Beyond's "tough quarter" is highlighted by a 6.6% decline in comps, 68% decline in adjusted EPS and a 63% decline in cash flow from operations, Basham wrote in a note. The poor performance can be attributed to lower transactions in stores, which was partially offset by an uptick in average transaction amount.

Basham said management wrote off 100% of its $401 million goodwill and assumed $46 million of additional charges related to severance and shareholder activism activities. Management also said trends seen so far in the second quarter are consistent with first-quarter performance.

UBS: 'Aggressive Expectation'

The company's same-store sales underperformed the broader Census Home Furnishing category by 780 basis points -- the largest share loss seen in more than a decade, Lasser wrote in a note. By comparison, the average spread between its performance and the category over the past eight quarters was 380 basis points.

Management expects to show improvements in its sales and also expanding margins, however, operating margins were lower by 130 basis points in the reported quarter implies management's outlook is an "aggressive expectation." In fact, Lasser said, a combination of sales improvements and margin expansion hasn't been seen over the past few quarters.

Related Link: Questionable Strategy, Disappointing Report: Analysts React To Bed Bath & Beyond's Q4 Earnings

Baird: A Look At Guidance

Bed Bath & Beyond's streak of yearly EBIT margin contraction is expected to end at seven as management guided to EBIT margins to be flat to up 40 basis points in fiscal 2019, Benedict wrote in a note. Gross margin is also modeled to improve by 10 points to 50 basis points after falling 186 basis points in 2018.

The company expects momentum to continue with further EBIT margin improvement in fiscal 2020 with a longer-term profile to return to 6% growth. But after comps declined more than 6% in the quarter, expectations for any stabilization in the coming quarters "remains low."

Wells Fargo: Turnaround 'Long Way Away'

Bed Bath & Beyond's earnings is an "incremental blow" to bulls as the company fell short "across the board" in what mattered most, Fadem wrote in a note. Several recent initiatives to turn the business around and simultaneously maintain margins have failed so far.

Meanwhile, the combination of a revamped board of directors and the leadership of interim CEO Mary Winston should be viewed positively. The analyst said Winston "talked a good game" related to improvements, including next-generation stores and pricing. The CEO also looks open to store closures and potential divestitures.

There are no guarantees that any new management team initiatives can result in improvements and management already set "the bar too high" for 2019.

Guggenheim: Waiting For Pricing Strategy

Management highlighted during the conference call its customer base is used to a 20% off coupon, Forbes wrote in a note. The mostly price-conscious customer base puts Bed Bath & Beyond in a difficult position. Increasing prices could translate to "some margin relief" even if the 20% coupon remains available, but increasing prices could impact the company's price perception.

Forbes said It will be a difficult task for management to balance the two options although management "must chase market share." This could negatively impact the company's risk-profile moving forward.