Bed Bath & Beyond – Bouncing Back Or Going Further Down?

Bed Bath & Beyond Inc BBBY surprised many with its stock bouncing back a bit by jumping nearly 5 percent during Monday's premarket trading but can the troubled retailer indeed pull out a comeback in 2020? Under its new CEO Mark Tritton, it pulled out some rather dramatic moves but many don't feel optimistic about the company's third quarter earnings that are scheduled to be released on Wednesday.

$250 Million Real Estate Deal

After the retailer announced a sale-leaseback transaction which resulted in proceeds of $250 million. Many enterprises have come down to this in an effort to pay off its debt but Target Corporation TGT resisted such a shift and even though Macy's Inc M had its share of limited asset sales, it resisted this widespread trend. The raising concern is whether the company is mortgaging its future after suffering from its first ever quarter loss last year.

December Storm

Tritton has been in the CEO seat for only a short while after leaving Target but is surely wasting no time in executing a turnover strategy. In December, he wiped out C-level management, leaving the company lighter by six executives. But Target, Amazon.com, Inc. AMZN and Walmart Inc. WMT are luring customers by selling pretty much the same items with more appealing internet presence and speedier shipping.

Third Quarter Expectations

Analysts are estimated a 6% decline in revenue $3.03 billion a year ago, coming down to $2.86 billion. Earnings forecasts are at $0.03 per share which is a dramatic 84% plunge from last year's third-quarter results of $0.18 per share. The company didn't provide quarterly guidance, but it did reiterate its full-year outlook for sales of $11.4 billion, which would be down 5% year over year.

With the cleaning being implemented by the head of the house, it wouldn't be surprising for the retailer to further drop its expectations. A bounce-back is unlikely, but the recent transactions could somewhat ‘protect' the stock from a consequent tumble.

Outlook

The retailer has outpaced the the S&P 500 index that reached 27.8% by gaining 34.6% over the past 12 months. Since Tritton was appointed CEO in October, shares went up over 40% and more than doubled from the lows they were hit by in August, but it is unlikely for this positive trend to be sustained in the near-future. Serious matters definitely need to be fixed but the results of the turnover strategy and whether this indeed is the first step toward unlocking valuable capital as according to the CEO, are yet to be seen.

How bad things truly got and the extent of damage Tritton is set out to remedy will be at least clearer after the company reports its third quarter earnings on Wednesday. But one thing is certain: removing half a dozen of executives who executed the turnaround strategy implies things aren't going according to plan.

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