Spooked Investors Send Bed Bath & Beyond (BBBY) Shares Spiraling on Back of Weak Guidance; Analysts Weigh In

Bed Bath & Beyond (NASDAQ:BBBY) shares nosedived Thursday after management issued guidance that faild to impress. Specifically, the home-goods chain said earnings per share in fiscal 2018 would be in the low to mid $2 range, compared to consensus estimates of $2.76 a share. The earnings pressure is due to investments across a wide range of initiatives spanning digital, sourcing, technology/digital and pricing analytics. Management also expects both EBIT and EPS to decline in FY19, suggesting a prolonged timeline to execute its turnaround strategy.

To the company’s credit, it reported 4Q revenue of $3.72 billion, beating expectations of $3.68 billion, while adjusted earnings per share were $1.48, outpacing consensus estimates of $1.39.

Citi analyst, Kate McShane commented, “BBBY’s is facing numerous issues. Its commoditized product offering has created an over-reliance on coupons. It is overstored, resulting in wage and occupancy cost pressure. The company appears to be constantly playing catch-up in terms of tech capabilities, digital selling and fulfillment […] We expect ongoing top- and bottom-line pressure over the next three years.”

As such, McShane reiterates a Sell rating on BBBY, while cutting the price target to $16 (from $17), which implies an 8% downside from current levels. (To watch McShane’s track record, click here)

Patience is required, says BTIG’s Alan Rifkin, “In our view, many of mgnt’s initiatives are unlikely to move the needle for some time given how slowly they are being ramped. For example, expanded decorative furnishings will only reach 10% of US/Canada stores this year and just 12 stores will have the most recent format by 2Q, less than 1% of the storebase. The FEO replatforming will not be completed until Fall and the new POS will be implemented in 6-12 months. Increasing the level of direct imports, a significant GM opportunity, will also certainly take time to ramp given long lead times to bring product from Asia to the USA. Nearly 1.5 years since Beyond+ was introduced, it remains a minor part of the business.”

Rifkin rates BBBY a Hold, without offering a price target.

Net net, Wall Street is not rooting for the Bed Bath & Beyond stock’s success, earning a weak analyst consensus rating. TipRanks analytics exhibit BBBY as a Sell. Based on 11 analysts polled in the last 3 months, 7 recommend a Hold on the stock while 4 issue a Sell. Surprisingly, the 12-month average price target stands at $19.00, marking a nearly 9% upside from where the stock is currently trading.

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