Bed Bath & Beyond Q1 Earnings: In-Store Sales Go Soft

Mid caphomedecor retailer Bed Bath & Beyond Inc (NASDAQ: BBBY)reported Q1 2017 earnings after yesterdays market close with both sales and earnings missing expectations. Net sales increased approximately 0.1% to $2,742,141 as comparable sales decreased by approximately 2.0% compared with a decrease of approximately 0.5% in last year’s fiscal first quarter.Comparable sales from customer-facing digital channels continued to have strong growth in excess of 20%, while comparable sales from stores declined in the mid-single-digit percentage range during the fiscal 2017 first quarter. Comp sales also reflect a decrease in the number of transactions in stores, partially offset by an increase in the average transaction amount. Net earnings were $75.3 million versus net income of $122.6 million. For fiscal 2017 guidance, the earnings release stated:

Although the first quarter is typically the least impactful quarter in terms of annual sales and earnings, and while the Company continued to have strong growth in its customer-facing-digital channels this quarter, the Company did experience increased softness in transactions in stores, as well as higher net-direct-to-customer shipping expense, coupon expense, and advertising costs during the quarter. It remains to be seen whether these challenges were more pronounced in, or unique to, the first quarter due to the smaller sales base in this period, and/or a later start to the summer selling period.

After the second quarter, the Company believes it will have better visibility to the full-year and, if necessary, will update its full-year modeling assumptions at that time.

In the earnings call, the

I’ll provide an update on the progress of some of our strategic initiatives since our last call in April. First, our digital channels, both web and mobile. They continue to grow at a very healthy pace, driven in part by a customer experience that keeps getting better. Some of the improvements that we have made include adding to our online product assortment and service offerings; improving our content to be more inspirational; making enhancements to search and navigation; and creating a more friction-less checkout experience

Second, our base of more than 1,500 stores continue to generate very profitable results. We are always working to optimize the profitability at our real estate portfolio and, as I’ve said before, we believe in the benefits derived from a well-executed omnichannel experience.

Third, with regard to marketing. We continue to focus on improving the effectiveness and efficiency of our campaigns through personalization, improved targeting, customer contact strategies, channel optimization as well as branding activities to reinforce our position as experts for the home.

The CFO added:

As you probably know, the first quarter typically accounts for the smallest portion of our annual sales and earnings. As a result, any fixed costs as a percentage of net sales are relatively more pronounced in the first quarter than they would be in any of the other quarters.

A technical chart for Bed Bath & Beyond shows a downtrend since the last holiday period:

A long term performance chart shows mid cap Bed Bath & Beyond in a steady decline since early 2015 while and small capPier 1 Imports Inc (NYSE: PIR)has performed worst, mid capRestoration Hardware Holdings Inc (NYSE: RH) is back up andmid capWilliams-Sonoma, Inc (NYSE: WSM)has drifted lower:

Finally, here is a quick recap of large cap Bed Bath & Beyonds recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

EPS Est. 1.16 0.98 1.77 0.66
EPS Actual 1.11 0.85 1.84 0.58
Difference -0.05 -0.13 0.07 -0.08
Surprise % -4.30% -13.30% 4.00% -12.10%
EPS TrendCurrent Qtr. (Aug 2017)Next Qtr. (Nov 2017)Current Year (2018)Next Year (2019)
Current Estimate 1.02 0.75 4.31 4.3
7 Days Ago 1.03 0.75 4.32 4.34
30 Days Ago 1.03 0.75 4.32 4.33
60 Days Ago 1.02 0.75 4.32 4.35
90 Days Ago 1.08 0.84 4.62 4.72

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