Bed, Bath & Beyond Shares Rip Higher After Q1 Earnings: What Do Analysts Think?

After a big day on Wednesday, Bed Bath & Beyond Inc. BBBY shares are now up 12.9% since the company reported first-quarter earnings and raised its 2021 guidance.

Bed, Bath & Beyond reported first-quarter adjusted EPS of 5 cents, narrowly missing consensus analyst estimates of 8 cents. First-quarter revenue of $1.95 billion beat analyst expectations of $1.87 billion. Revenue was up 49% from a year ago.

The company said digital sales accounted for 38% of its total sales. Core sales, which include Bed Bath & Beyond, Buybuy Baby, Harmon Face Values and Decorist, were up 73% in the quarter.

Same-store sales were up 86% from a year ago and 3% from pre-pandemic levels in 2019. Analysts were expecting just 75.6% same-store sales growth.

Looking ahead, Bed, Bath & Beyond raised its full-year revenue guidance from a previous range of between $8 billion and $8.2 billion to a new range of between $8.2 billion and $8.4 billion. Even the low end of the new revenue guidance range exceeded consensus analyst estimates f $8.15 billion.

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Transforming Business: Bank of America analyst Curtis Nagle said the company demonstrated strong growth in the first quarter and is making significant progress investing in future growth.

“While it may take a couple quarters to prove out, we view big changes in the quality of BBBY’s senior management, store base (150 remodels of high productivity stores this year) and product assortment (8 new owned brands will launch this year) as underappreciated growth factors,” Nagle wrote in a note.

CFRA analyst Kenneth Leon said Bed, Bath & Beyond’s three-year transformation plan appears to be on track.

“We think BBBY can execute major brand introductions that will boost the digital experience, as evident with digital sales up 84% Y/Y in May-Q,” Leon wrote.

Telsey Advisory Group analyst Cristina Fernández said first-quarter numbers were slightly better than expected, but the company continues to demonstrate progress on its strategic initiatives.

“The increased private label penetration of 19% in 1Q21 from 10% last year (just one quarter after the first brand launch) and e-commerce penetration of 38% vs. 19% in 1Q19 were standouts,” Fernández wrote.

Secular Challenges: Raymond James analyst Bobby Griffin said management appears to understand the core challenges the company is facing and has already demonstrated progress on those fronts.

“Nonetheless, BBBY still remains a ‘prove me’ story, especially as the home furnishing industry starts to comp against elevated home related spending due to COVID-19 for the remainder of CY21,” Griffin wrote.

KeyBanc analyst Bradley Thomas said the first-quarter numbers were solid against easy pandemic comps, but the company’s secular challenges remain.

“We think BBBY remains a fundamentally challenged retailer, despite encouraging work done under the leadership of new CEO Mark Tritton,” Thomas wrote.

Ratings And Price Targets:

• Bank of America has a Buy rating and $38 target.
• CFRA has a Buy rating and $40 target.
• Telsey Advisory Group has a Market Perform rating and $35 target.
• Raymond James has a Market Perform rating.
• KeyBanc has an Underweight rating and $22 target.