With a $376.60 million market cap., Bed Bath & Beyond Inc. (BBBY) operates a chain of retail stores. The company sells a range of domestic merchandise, home furnishings, and other juvenile products. The company owns more than 953 stores and offers its products through various websites and applications comprising bedbathandbeyond.com, bedbathandbeyond.ca, facevalues.com, buybuybaby.ca, and decorist.com.

Investors have been bearish about BBBY due to its deteriorating financials and declining growth. The company's fiscal 2022 first-quarter results were adversely affected by the ongoing macroeconomic headwinds, the shift in consumer preference, surging inflation, supply-chain disruptions, and dislocation in sales and inventory.

BBBY's Interim Chief Executive Officer, Sue Gove stated, " In the quarter, there was an acute shift in customer sentiment, and since then, pressures have materially escalated. This includes steep inflation and fluctuations in purchasing patterns, leading to significant dislocation in our sales and inventory."

"I look forward to working with the Board, the management team, and our Associates to immediately address our supply chain challenges, market share recapture, inventory and cash optimization, and cost structure alignment," she added.

The stock has plummeted 67.7% in price year-to-date and 85.6% over the past year to close the last trading session at $4.71. BBBY is currently trading 85.1% below its 52-week high of $31.70, which it hit on July 13, 2021.

Here is what I think could influence BBBY's performance in the upcoming months:

Poor Financials

For its fiscal first quarter ended May 28, 2022, BBBY's net sales decreased 25.1% year-over-year to $1.46 billion, and its gross profit declined 44.9% from the year-ago value to $349.31 million. Its operating loss widened 371.9% year-over-year to $339.16 million.

BBBY's adjusted EBITDA loss amounted to $223.54 million, compared to an $86.07 million gain reported in the prior-year period. In addition, the company's net loss and net loss per share came in at $357.67 million and $4.49, respectively, widening 603% and 835.4% year-over-year.

Weak Growth Prospects

Analysts expect revenues to decline 13% year-over-year to 1.63 billion in its fiscal 2022 third quarter (ending November 2022). However, the $1.13 consensus loss per share estimate for the next quarter reflects a 352.4% increase from the same period in 2021.

Also, the company's revenue and EPS for the current year (ending February 2023) are expected to decline 17.6% and 467.1%, respectively, year-over-year. The company has missed the consensus revenue estimates in each of the trailing four quarters.

Low Profitability

In terms of trailing-12-months gross profit margin, BBBY's 31.04% is 15% lower than the 36.51% industry average. Likewise, its trailing-12-months EBIT margin is negative 5.24%, and its trailing-12-months net income margin is negative 11.74%. Furthermore, the company's trailing-12-months ROCE and ROTA are negative 195.5% and negative 17.51%, respectively.

Consensus Rating and Price Target Indicate Downside

Of the 12 Wall Street analysts that rated BBBY, eight rated it Sell, while four rated it Hold. The 12-month median price target of $4.16 indicates an 11.7% downside. The price targets range from a low of $1.00 to a high of $14.00.

POWR Ratings Reflect Bleak Prospects

BBBY has an overall rating of D, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

BBBY has an F grade for Stability and Sentiment. The stock's relatively high beta of 1.60 justifies the Stability grade. In addition, BBBY's F grade of Sentiment is consistent with its bleak revenue and earnings growth estimates.

The stock has a D grade for Quality, in sync with its lower-than-industry profit margins.

BBBY is ranked #61 out of 63 stocks in the Home Improvement & Goods industry.

Beyond what I have stated above, we have also given BBBY grades for Value, Growth, and Momentum. Get all the BBBY ratings here.

Bottom Line

The company’s near-term prospects look uncertain due to the supply chain disruptions, macroeconomic headwinds, and shifts in consumer spending patterns amid an economic slowdown. Moreover, the stock is currently trading below its 50-day and 200-day moving averages of $9.50 and $15.87, respectively, indicating a downtrend.

So, given its disappointing financials, bleak growth prospects, and low profitability, we think it could be wise to avoid the stock now.

How Does Bed Bath & Beyond Inc. (BBBY) Stack Up Against its Peers?

BBBY has an overall POWR Rating of D. One could also check out these other stocks within the Home Improvement & Goods industry with a B (Buy) rating: Bassett Furniture Industries, Incorporated (BSET), Acuity Brands, Inc. (AYI), and The Tile Shop Holdings, Inc. (TTSH).

BBBY shares were trading at $4.66 per share on Tuesday afternoon, down $0.05 (-1.06%). Year-to-date, BBBY has declined -68.04%, versus a -19.80% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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