Why BofA Is Bearish On Bed, Bath & Beyond

Although Bed Bath & Beyond Inc. BBBY is making progress in its turnaround, its comps continue to “meaningfully lag the industry," being 26 percentage points lower in the second quarter of 2021, according to BofA Securities.

The Bed Bath & Beyond Analyst: Jason Haas reinstated coverage on Bed Bath & Beyond with an Underperform rating and $14 price target.

The Bed Bath & Beyond Takeaways: While the company attributed its soft second-quarter earnings to an industrywide slowdown in August, this trend “is not evident in our industry spending data,” Haas said in a note to clients.

“And BBBY’s comps have not improved in September even as COVID cases have fallen,” the analyst said. 

“Gross margin missed guidance that was provided at the end of June, and we think BBBY will again miss guidance in 3Q and 4Q due to high shipping costs.” he said. 

“Comps have benefited from recaptured sales from closed stores but this tailwind will likely fade through 2022. And margins have increasingly been propped up by restructuring add-backs (nearly 500bp in 2Q21),” Haas said.

“BBBY’s store remodels have yet to drive a material lift; we estimate a 30bp total company comp lift in 2Q21 rising to a high of 70bp in ’23.” 

BBBY Price Action: Shares of Bed Bath & Beyond were trading down 4.14% to $15.05 midday Tuesday.