Bed Bath & Beyond Analysts React To Q2 Print, Same-Store Sales Miss

Bed Bath & Beyond Inc. BBBY shares were volatile Thursday in the wake of the retailer's second-quarter same-store sales miss.

Credit Suisse analyst Seth Sigman said the second-quarter results were weak and point to a company still undergoing a transition.

“The quarter on its own wasn’t surprising and didn’t seem enough to change either side of the debate, with the next major catalyst being the announcement of a new CEO, and perhaps other efforts to refocus the strategy and exit non-core businesses,” the analyst said in a Thursday note. 

Progress has been made on the cost side, but the addressing of key gaps like the need for more competitive pricing, differentiated assortment and better omni-channel offerings is still less clear, he added.

Credit Suisse maintained a Neutral rating and lowered the price target from $18 to $12.

Wells Fargo: Bears Jumping Back On Bed

Wells Fargo analyst Zachary Fadem said bears are jumping back on the bed following a disappointing quarter.

The second quarter was a clear reminder that the company’s turnaround has yet to yield material signs of improvement, the analyst said in a Wednesday note. 

“While cash-generating initiatives and a pending CEO announcement could add near-term promise, we view BBBY’s widening fundamental deterioration as the predominant driver of shares going forward,” he said.

Wells Fargo reiterated an Underperform rating and lowered its price target from $10 to $9.

Wedbush: Plans To Stabilize Are In Motion

The second-quarter report indicated that plans are in motion to stabilize sales and earnings, Wedbush's Seth Basham said in a Thursday note. 

“While a very large inventory writedown and severance related to a corporate workforce reduction supported adjusted margins, we believe BBBY is taking appropriate action to drive better sales performance in the second half of 2019 and beyond, giving us confidence that the company can hit its unchanged FY19 guidance,” the analyst said. 

Wedbush maintained an Outperform rating with a $16 price target.

BofA Sees Silver Lining 

While bears will pick at a large earnings adjustment on rationalization of unproductive inventory,  Bank of America Merrill Lynch analyst Curtis Nagle said he sees several positive factors in the upcoming quarter.

“This includes comps above buy side expectations and continued improvement in 3Q, the first increase in gross margin in years, potentially hundreds of millions in savings from sourcing/private label efforts, store rationalization and much lower than expected impact from tariffs,” the analyst said in a Thursday note. 

Bank of America reiterated a Buy rating with a $20 price target.

UBS Stays Neutral

Looking forward, Bed Bath & Beyond expects to improve its same-store sales through initiatives such as store renovations and adding sales based incentives for store managers, UBS analyst Michael Lasser said in a Thursday note. 

“Importantly, it intends to add incremental marketing dollars in advance of the holiday season. While this makes sense, there is a risk that BBBY’s spending might get crowded out as other retailers promote during holidays. Plus, the market will likely look for evidence these actions can generate the magnitude of growth needed to drive top-line stabilization before rewarding its shares.”

UBS maintained a Neutral rating and lowered the price target from $13 to $11.

KeyBanc: Retailer At Turning Point 

Bed Bath & Beyond is at a critical transition point, as its fundamentals remain challenged, but the new board and management are working to accelerate change, KeyBanc Capital Markets analyst Bradley Thomas said in a Wednesday note. 

“While we continue to see risk to sales, we also believe new management can find cost, margin, and capital allocation opportunities that could create meaningful value for shareholders, particularly considering the current valuation of the stock, though this seems more likely to bear fruit in 2020.”

KeyBanc maintained a Sector Weight rating on the company.

Price Action

Bed Bath & Beyond shares were up 0.81% at $10.10 at the time of publication. 

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