On Wednesday, January 8, third quarter earnings and revenue miss caused the share price of Bed Bath & Beyond Inc (NASDAQ: BBBY) to plunge 8 percent with the retailer withdrawing fiscal 2019 outlook. On Thursday, stock was down 11 percent in premarket trading.
Third Quarter Earnings
Oh, how the mighty have fallen seems as the appropriate phrase to describe net earnings from of $24.4 million from one year ago dropping to a net loss of $38.6 million. Refinitiv expected earnings of 2 cents whereas the retailer delivered an adjusted loss per share of 38 cents.
Revenue dropped 9 percent and amounted to $2.76 billion with same store sales dropping 8.3 percent versus the 5 percent expected. Both sales and profitability are expected to remain under heavy pressure in the fourth quarter as well. The retailer found that its results were significantly impacted by the fact Thanksgiving fell later than usual, resulting in one week less of holiday sales.
On Monday, the retailer announced that it accomplished a real estate deal that netted the company $250 million in proceeds, what according to Tritton is the first step towards unlocking valuable capital. And only in December, Tritton decided to let six senior executives go and is currently in the recruitment process for their roles. Bed Bath and Beyond's turnaround strategy is well underway with these swift changes but surely, there are many more to come as some of these executives have been with the company for more than 20 years – so "out with the old, in with the new" it is.
Amazon.com, Inc. (NASDAQ: AMZN) has vigorously shaken up the retail landscape, but Target Corporation (NYSE: TGT) and Walmart Inc (NYSE: WMT) are by no means, left behind, but are in fact doing beyond great as they are successfully luring customers with more attractive websites and speedier shipping. And all of them are selling pretty much all the products that Bed Bath & Beyond has in store, leaving the struggling company in quite a turmoil.
But Amazon is by no means still the emperor sitting on the e-commerce throne as it is literally bleeding out to retain its crown. The world's biggest online stores is losing money on its sales in order to achieve its shipping policy and in the world of ‘free-shipping', it seems it could soon be beaten by Walmart, world's third largest store but America's largest retailer.
And it is growing fast into online retail with its online sales exploding 78 percent up since 2016, but more importantly, now growing twice as fast as Amazon.
And here's the trick, Walmart is using its physical stores as warehouses for online sales. And since these stores are already turning a profit, maintaining extra warehouse space is nothing but a small addition to costs and that makes its strategy far different. Amazon only has 110 warehouses across the US so Walmart will soon have the biggest and more effective shipping network. Although both have great growth potential, Walmart is going full speed ahead in the online retail wars. Not good news for Amazon and especially for poor old Bed Bath & Beyond.
CEO Mark Tritton, a Target veteran who started commanding the ship in October has announced that strategic plans for creating a long-term profitable growth will be revealed within the next two months, showing his discontent with these unsatisfactory results which are more than an imperative for change of the current business model. Bed Bath & Beyond desperately needs a new vision and hopefully, Tritton will be able to deliver it, otherwise things could get even worse.
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