Bed Bath & Beyond Inc. (BBBY) on Q1 2022 Results - Earnings Call Transcript

Operator: Welcome to the Bed Bath & Beyond’s Fiscal 2022 First Quarter Earnings. My name is Sylvia and I’ll be your operator for today’s call. As a reminder, the conference is being recorded. I will now turn the call over to Susie Kim, Head of Investor Relations. Susie Kim, you may begin. Susie Kim: Thank you and good morning, everyone. Welcome to our fiscal 2022 first quarter earnings call. Joining us today are Harriet Edelman, Independent Chair of our Board of Directors; Sue Gove, Director and Interim Chief Executive Officer; and Gustavo Arnal, our Chief Financial Officer. Before we begin, let me remind you that our fiscal 2022 first quarter earnings release and slide presentation can be found in the Investor Relations section of our website at bedbathandbeyond.com and as exhibits to our related Form 8-K. This conference call and the slides we refer to may contain forward-looking statements, including statements about or references to our outlook regarding the company’s performance, our internal models and our long-term objectives. All such statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say during the call today. Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties, including the Risk Factors section in our annual report on Form 10-K and our quarterly reports on Form 10-Q. The company undertakes no obligation to update or revise any forward-looking statements. Additionally, the information we will discuss today contains certain financial measures that exclude amounts – or are subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure prepared in accordance with generally accepted accounting principles. For a reconciliation to the most comparable measures presented in accordance with GAAP, please refer to the table in our earnings release available on our website and included as an exhibit to our Form 8-K filed later today. I would now like to turn the call over to Harriet. Harriet Edelman: Thank you, Susie and good morning everyone. Thank you for joining us today. Before Gustavo covers this quarter’s financial results in detail, I will spend a few minutes on the announcement we shared earlier. Today, we announced significant changes to our executive leadership team. Sue Gove, Independent Director and Chair of the Strategy Committee, has been named Interim Chief Executive Officer replacing Mark Tritton, who is leaving the company. And Mara Sirhal has been appointed Chief Merchandising Officer taking over for Joe Hartsig, who is no longer with the company. Sue has a pivotal role in overseeing this transition and making sure we take swift action. Sue has served on our board since 2019 and is a deeply experienced board member and business executive across a number of senior financial, operating and strategic roles. Leading the Strategy Committee has given her strong insight into the potential of the company and her deep experience in corporate retail transformation will enable quick decisive actions during this transition. She and I have worked together closely for the past few years. Sue is an insightful, intelligent and influential leader. I know she will quickly make a significant impact. As for Mara, having most recently served as Bed Bath & Beyond’s Senior Vice President and General Manager for Harmon, she will be responsible for driving the company’s omnichannel merchandising, planning and owned brand strategies while also retaining her position as General Manager for the health, beauty and consumables business. On behalf of the entire Board, I want to recognize and thank Mark for his many contributions over the past 2.5 years. Mark’s accomplishments include launching our transformation strategy, introducing owned brands, investing in technology and infrastructure, repositioning buybuy BABY and building out our omnichannel and digital capabilities. In addition, he led the company through the COVID-19 pandemic and was dedicated to keeping our associates, customers, and communities safe and served. I’d also like to thank Joe for his hard work and dedication in developing and implementing our overall product strategy, and in particular, owned brands. Our performance today requires an adjustment to strategy and a deep focus on basic operational execution. The results that Gustavo will discuss in a few minutes are not reflective of our capabilities and potential. We should be achieving so much more. Board members and management came to our company, because we believe that our unique place amongst customers’ many options is as compelling today as it was at its founding. And the opportunity to drive growth and unlock the value of our banners is what we are here to do. The macro environment right now presents a number of challenges for our business. A convergence of factors and the serial nature of them is unparalleled in my years of experience in the consumer sector. Still, we recognize, first and foremost that our results will be improved by our making important changes in how we serve customers, operate our business and deliver against the premise mentioned earlier. I will also share a few comments regarding the update provided on the Strategy Committee. As you know, our Strategy Committee has been evaluating options for buybuy BABY. The committee is working closely with both strategic and financial advisers to properly assess the business’ inherent value potential. That work is ongoing and it is important to underscore that the board sees significant value in buybuy BABY. It is a highly relevant banner with a strong market position and favorable demographics. Before I turn this over to Sue, who will discuss her near-term priorities in more detail, I will close by emphasizing on behalf of the board that we are united behind the priorities needed to stabilize the company and create value for shareholders. Now, I’d like to turn the call over to Sue for some quick introductory remarks. Sue? Sue Gove: Thanks, Harriet and good morning, everyone. We appreciate you joining us today. I want to begin by saying how honored I am that the Board of Directors has placed their trust in me to lead Bed Bath & Beyond at this critical moment. I echo Harriet’s comments that all of us on the board have a deep respect for this company and the heritage of our banners and a firm commitment to our stakeholders to drive improvement. I have been a loyal Bed Bath & Beyond customer since the beginning and was in our stores this past weekend working through the college checklist for my daughter. Today, I want to share some brief remarks on our results and how I am thinking about near-term priorities. We spent a significant amount of time evaluating areas of need and potential for the business and you can expect to hear more from myself and the team in the weeks and months ahead. I look forward to meeting with our associates, partners and shareholders as I lean into my role. Before I jump into some of the near-term priorities, I too want to thank Mark for his dedicated leadership and counsel through some of the most volatile times in our company’s history. His oversight through the pandemic and commitment to keeping our associates and customers safe has been remarkable. That care remains a top priority as I step into this role. I could go on, but suffice to say, Mark leaves a meaningful impact. As Harriet mentioned, our results are not up to our expectations nor are they reflective of our potential. Like many of our retail peers, Bed Bath & Beyond is facing a difficult macro environment. However, even during these periods of industry-wide challenge, our shareholders, associates, customers and partners all expect more from us and I couldn’t agree more. We must deliver better results. We have products that are positioned to meet needs for customers across important and resilient categories and we have identified areas of focus in which we can improve. Our offerings and brands need better balance to what our customer wants. Our inventory position needs refinement. While we have been working to address these areas of focus, some have been effective and others have not. From where I sit right now, the areas that I consider to be working include: owned brands has a place in our assortment, particularly with the introduction of new opening price points within a label like Simply Essential. As we have already discussed, we are pleased with where buybuy BABY is positioned and see exciting potential. Our omnichannel and digital capabilities have grown in services such as BOPIS and same-day delivery answers the evolving needs of our customers. We also launched our new loyalty program, Welcome Rewards, last week and we are excited about what we are seeing in these early test days. In the near-term, we have very clear priorities for where we must see improving results. First, we have to make sure we are focusing resources on driving traffic to stores and digital platforms. We also must prioritize how we are serving customers to recapture market share. I believe a lot of this work is best done in a back-to-basics mantra that prioritizes knowing our customer and delivering the experience they deserve wherever they interact with us. Equally, we must become a more efficient and profitable business. We must stabilize the company’s supply chain, reduce costs, lower inventory and strengthen the balance sheet. Gustavo will have more on near-term efforts on this front, but expect much more on these topics in the future. We have a lot to do and we must do it quickly. That’s why as we move through this transformation, we have also decided to hire a leading retail advisory firm, BRG, to focus on cash, inventory and balance sheet optimization. We understand there are many adjustments happening simultaneously. Therefore, we look forward to sharing an update on our progress later in the summer. We continue to work with a sense of urgency in these efforts and we are very focused on finding the best opportunities available to maximize value for all stakeholders. These initiatives would not be possible without the tireless efforts of our leaders and associates who work to serve and interact with our customers to make it easy to feel at home. I am optimistic about the future of the company and its continued progress and I am confident in our ability to drive improvements in 2022 and beyond. With that, I will turn the call over to Gustavo to address the financials. Gustavo? Gustavo Arnal: Thank you, Sue and good morning everyone. For our first quarter, total net sales were approximately $1.5 billion, which reflects a decline of 25% and a comp sales decline of 23% versus last year. This comp decline was consistent with the quarter-to-date trends we shared on our April earnings call as sales continue to be challenged throughout the quarter. As a reminder, net sales continued to reflect the impact from our store fleet optimization program, although the impact is now smaller than in prior quarters. Also, we have fully anniversaried our completed non-core divestitures. By channel, store comp sales were down 24%, while digital sales declined 21% versus last year. Our digital channel remains approximately 40% of total net sales. By banner, Bed Bath & Beyond comparable sales decreased 27% versus last year. buybuy BABY comparable sales decreased mid single-digits, consistent with market trends and Harmon delivered positive comps. GAAP gross margin for the quarter was 23.9% and 23.8% on an adjusted basis. Supply chain costs remain elevated, impacting adjusted gross margin negatively by 330 basis points year-on-year, which more than offset 60 basis points of higher net product margin. Additionally, we had a negative 840 basis point impact from transient costs related to inventory markdown reserves and port-related supply chain fees. Excluding these transient costs in the quarter, adjusted gross margin was 32.2%. As we announced this morning, we are taking immediate and aggressive actions on cost, capital spending and, in particular, on inventory. During Q1, the arrival of delayed unit receipts with long lead times was met with sharply lower demand. This led to higher inventory of approximately 15% versus last year, while at the same time, sales were 25% lower. This delta of almost 40 percentage points between sales and inventory is worth more than $0.5 billion in cash. As exhibited by the inventory charge taken this quarter, we intend to work aggressively to clear the excess inventory that we and the industry now face. Additionally, we will reduce planned capital expenditures by a minimum of $100 million to approximately $300 million. SG&A dollar expense remained below last year, primarily due to cost reductions and lower rent and occupancy expense following our store fleet optimization program. However, given lower revenues, SG&A as percentage of sales was higher, which is why we are taking even more aggressive actions on costs, as announced today. Our sales of gross margin performance led to negative adjusted EBITDA of $224 million, which was a loss of approximately $100 million when excluding the aforementioned transient costs that impacted adjusted gross margin. Turning to our balance sheet and cash flow, net cash used in operations was approximately $380 million. Capital expenditures for the quarter were approximately $100 million as we continue with key investments within supply chain and IT systems as well as certain initiated remodels. As the quarter progressed, we partially funded working capital through $0.2 billion in borrowings against our $1 billion asset-based revolving credit facility. We ended the quarter with a cash and investment balance of approximately $0.2 billion and with total liquidity of $0.9 billion. I will now share our updated outlook commentary for this year, which will continue to be qualitative. At this point, in the second quarter, our comp sales continue to trend in the negative 20% range. As we progress through the year and based on the news we announced today, we are sharing the following: negative comp sales to improve sequentially in the second half of fiscal ‘22, driven by inventory optimization plans, including incremental clearance activity; full year SG&A expense below last year, reflecting aggressive actions to align cost structure to sales, inclusive of the previously announced $100 million expense optimization program; finally, we are reducing planned capital expenditures by a minimum of $100 million from $400 million to $300 million for fiscal ‘22. Operator, we are now ready for questions. Operator: Thank you. And our first question comes from Jonathan Matuszewski from Jefferies. Please go ahead. Jonathan Matuszewski: transition. You mentioned the search for a permanent CEO is underway. Just curious how the criteria you are emphasizing on this go-forward search is different from the prior search? That’s my first question. Thanks. Harriet Edelman: Thank you. This is Harriet answering. So clearly, we want a focus on merchant skills, modern retailing, digital and omni capabilities, but sharp skills and emphasis on operations execution, cost effectiveness and balance sheet. Jonathan Matuszewski: Got it. Thanks so much. And then just a follow-up question on expense rationalization, it sounds like you are going to be taking a more aggressive stance with operating cost reduction. Last quarter, we learned about $100 million expense rationalization program for fixed and discretionary costs. Can you elaborate a little bit more on the new areas that you will be focused on? Thanks so much. Gustavo Arnal: Hi, Jonathan, Gustavo here. It’s all about not leaving any stone unturned, going deeper into some of the areas that we have already started working on, like optimizing our forward profitability, store fleet optimization, supply chain costs, and frankly, any indirect spend or variable cost to improve both gross margin and improve our SG&A rate. We need to right-size the business according to our recent sales trends. Sue Gove: Yes. And this is Sue. I would just add to that, that we are going to be focusing our resources on the things that are going to drive immediate results. So we will be prioritizing that in near-term as we prioritize our cost opportunities. Jonathan Matuszewski: Thank you. Best of luck. Sue Gove: Thank you. Operator: Our next question comes from Michael Lasser from UBS. Please go ahead. Michael Lasser: Good morning. Thanks a lot for taking my question. How does Bed Bath make the necessary systems and supply chain investments at a time where it really needs to preserve capital? And on that point, Gustavo, do you think you have enough capital to allow the company to complete its transformation? And if you do need to raise capital, what will be the best approach right now? Gustavo Arnal: Yes. Hi, Michael, look, first, in terms of capital spending, as Sue said, we’re focused on the areas that will matter the most, which is why you’ve already seen a very decisive change in our capital spending plan this year, bringing it down by third from $400 million to $300 million. We do think it is important to protect within that $300 million for now the elements related to capabilities, system capabilities, supply chain capabilities, technology capabilities because we’re living in a very challenging and dynamic world, and there is still a need to modernize the company. On your question of access to capital, look, we have sufficient liquidity within our credit facility as we speak. And working with BRG, working with our financial advisers, there are avenues that we’re exploring to even increase further our liquidity and navigate through the working capital cycle, particularly in the next two quarters given the seasonality of our business. So we are confident on our ability to manage cash, liquidity, strengthen the balance sheet and be very focused where we invest and where we take costs out. Michael Lasser: Understood. My follow-up question is, with all due respect, when a retailer gets into a challenging and precarious situation like this, it can be hard to reengage with customers, it can be hard to maintain the faith of your vendor partners, and it can be difficult to maintain the experience in the stores. Why is this situation different? Sue Gove: Yes. And this is Sue. You’re right. We’re going to be focusing on balancing our assortment, lowering our inventories, managing our costs, strengthening our balance sheet. Our vendor relationships, our vendor partnerships are going to be critical. And we think that we’ve got those relationships in place. We’ve got a strong team in place. And most importantly, we’re going to be focusing on the customer and getting them back into our stores and offering them the product that they want to see. Michael Lasser: Thank you very much and good luck. Operator: The next question comes from Justin Kleber from Baird. Please go ahead. Justin Kleber: Yes. Hey, guys. Thanks for taking the question. Gustavo, I just wanted to ask about gross margin and any color you could provide on kind of the trajectory going forward. You mentioned the 840 basis points of transitory costs during the first quarter. I mean, do we expect those to effectively fade here in 2Q? Or does some of that linger into the balance of the year? That’s my first question. Gustavo Arnal: Yes. Justin, part of the reason we wanted to show those costs separately as we did in the fourth quarter is exactly to what you just said, right? Those are transient, right? We took a significant charge on inventory, right, in this first quarter. We will continue working through this. But this was a big intervention. It’s hard to say one-off. The world is very dynamic. But that’s that, and that was a significant portion of it. The other was port-related fees. I said in my – in the call last quarter, that this was a Q4 and Q1 dynamic. And that’s the case. We don’t expect any material port fees, penalties in the second quarter. So we’re keenly focused on the gross margin, not excluding those items, but driving cost out, offsetting the supply chain increases – the ongoing supply chain increases, freight and product margin. Justin Kleber: Okay. Thanks for that. And do you have, I guess, maybe a year-end inventory goal you’re targeting? And then somewhat related, you talked about the improvement in comps across the back half of the year. It seems like it’s largely a function of clearing through inventory. Any way you could kind of size the top line impact from clearance in the back half of the year? Gustavo Arnal: Yes, Justin. We do have an internal inventory goal. We have objectives month by month, quarter by quarter. We’re not at a point of declaring that at this point, right? Other – but the flavor I would give you is there is cyclicality in the business, right? There is a seasonality. We still need to – while we’re addressing inventory down aggressively in the areas where we feel we’re a little bit bloated, right, and where we’re intervening, we still need to protect our inventory levels through the back-to-college season, through the important holiday season in November and December. So expect the inventory reduction to come more later into the fiscal year just is the nature of the cycle of our business. Justin Kleber: Alright. Thanks so much. Operator: Our next question comes from Jason Haas from Bank of America. Please go ahead. Jason Haas: Hi, good morning and thanks for taking my questions. So the first, I wanted to follow-up on the comments regarding the Strategy Committee’s findings regarding the buybuy BABY business. I’m curious, just to clarify the language, is that – are you guys still considering a sale for that buybuy BABY division? Or at this point, is that off the table? And then curious what the strategic path is for that company, if it will remain with your business. Sue Gove: Yes. This is Sue. So the business is a very attractive business. And we’re not alone in appreciating its value. We know there is interest. The Strategy Committee has done a great deal of work to date on evaluating the potential of the business, and the business remains strong today as we stated. So we’re going to continue to build on that work to evaluate the options of the business and unlocking the future potential. It’s still a work in process. But as I said, we know there is interest. Jason Haas: Great. Thank you. And then as a follow-up question, maybe for Gustavo. On the – I think you called out quarter-to-date still seeing a mid-down 20% comp. To what extent is the inventory clearance benefiting that quarter-to-date number? Gustavo Arnal: It is all within the mix, Jason. So we’re working within the second quarter, right. Those sales trends will be part or related impacted by the inventory clearance. Jason Haas: Got it. Okay. So it sounds like that there is some benefit. I guess you’re not quantifying it, but there is some benefit from inventory, correct? Because I guess it’s already under way. Is that the right way to think about it? Gustavo Arnal: Yes. Jason Haas: Okay, thank you. Operator: Our next question comes from Carla Casella from JPMorgan. Please go ahead. Carla Casella: Hi, my question is related to the balance sheet. You’ve got a 2024 maturity coming up, and given you’ve got a lot of changes going on now and negative cash flow, I mean, how do you start to think about how you would address that issue? Gustavo Arnal: Hi, Carla, Gustavo here. Yes, of course, this is part of our capital structure planning. We are not only looking at fiscal ‘22, the immediate fee of this fiscal year, and as I have said before, quarter-to-quarter, but also fiscal ‘23 and the maturity on 2024. We have capacity to deal with that, and we’re not declaring anything specific at this point. Carla Casella: Okay. Great. And then there is been a lot of questions and talk on inventory. But – so should we expect inventory to be a large source of cash for the next few quarters? Or do you still have a lot coming in to the port so it would make it more working capital use for the year? Gustavo Arnal: Yes. It won’t be a source of cash in the next – when we look at Q2 and Q3, particularly because of the seasonality dynamic I mentioned. So it will be more of a Q4 dynamic. Operator: Thank you. And our next question comes from Seth Basham from Wedbush. Please go ahead. Seth Basham: Thanks a lot. Good morning. My first question is on inventory. Can you give us some more color as to what areas in which you’re bloated and what the assortment plan is going forward? Gustavo Arnal: Yes. We’re – a lot of the immediate actions we’re taking now are related to owned brands, and there is a couple of reasons for it. One, these are products mostly imported that have a long lead time. And as we spoke earlier, there was a mismatch between when the demand was estimated, when the supply actually happened, compounded by the supply chain challenges in the industry back in last year, right? And now with softer demand, so we’re seeing in the home categories contracting as we speak. So there is that dynamic on the mismatch on supply chain and demand or current consumption. The other is, as Sue said, owned brand is important in our strategy, but it needs to be adjusted. There are perhaps some subcategories and – within some brands that we overextended, and we’re addressing that as we speak. Sue can provide more color on it. Sue Gove: Yes. We think that the customer wants to see more of an optimal balance of national brands, direct-to-consumer brands and company-owned brands. So we’re focused on improving the category mix and driving traffic to our stores with the customer at the focus of that. Seth Basham: Thanks. That’s helpful. And then circling on the marketing plan going forward, you guys have struggled somewhat driving traffic and you’re losing market share. How are you going to adjust the marketing plan to do a better job driving that traffic to your stores and your website? Sue Gove: Yes. We’re in our timing of back to college right now. We made some shifts in our marketing plan there with introducing that back-to-college event in early May, capitalizing on the high school, college acceptance today. We feel pretty positively about our positioning with the marketing momentum. Traffic is a critical area, and so we will continue to tackle that. We’re going to be monitoring the data and results. We also just launched our loyalty program as a test. We’re very excited about the early reads, and we’re going to be talking and giving you updates on that in the near term. Seth Basham: Thank you. Operator: Our next question comes from Cristina Fernandez from Telsey Advisory Group. Please go ahead. Cristina Fernandez: Very good morning. Thanks for taking my question. I wanted to follow-up on the private brands strategy. Given the long lead times, I guess, when do you think you can make a more impactful change there and perhaps add back some of those national brands that consumers would like to see in your stores? Sue Gove: Yes. Our merchant team is heads down on this right now. They are immediately focused. As we announced today, with Mara stepping into the leadership role of merchandising, she’ll be working very closely with her team to evaluate the assortments. They’ll be immediately engaging with the vendor group, and we are looking at having a vendor day in the very near-term. So we’re on it, heads down focused on that area immediately. Cristina Fernandez: And then my second question, on the press release, you commented about pressures materially escalating in the second quarter to date from the first quarter. Can you comment more on that, what you’re seeing in the last month or so. And as it relates to the fluctuations in purchasing patterns by consumers, what areas within the home are you seeing the biggest contraction? Gustavo Arnal: Yes. Cristina, Gustavo here. Look, the pressures that we talk escalating through the quarter, is when we spoke last was mid-April we provided visibility on our own trends for the month of March or quarter-to-date. Our trends remain. But after our release, we saw the results of many retailers and the inflation escalating, interest rate escalating. It’s just the macro environment has gotten significantly more challenging or at least visibility to it. So that’s what we referred to. There was the second part of the question. Remind me. I apologize for that. Cristina Fernandez: It’s around the changes in purchasing patterns, like within the home – wellness and the home. Thank you. Gustavo Arnal: Thank you. Thank you. Yes, yes, yes. Thank you, Cristina. So look, we had seen since 6 months ago, started to see declining growth rates in the home categories. And we measure very closely Bed Bath & Kitchen, which are about 50% of the Bed Bath revenue. Those categories are now declining – the past 3 months declined double digit. When you look at the data, March, April, May, those – the aggregate of those three categories declined double digits. So it’s part of the explanation for our challenging revenues. But again, we still also have our own internal challenges. Operator: We have time for one more question. That question comes from Susan Anderson from B. Riley. Susan, please go ahead. Susan Anderson: Hi, good morning. Thanks for taking my question. I was wondering if maybe you can give your thoughts just around the Bed Bath store base, how you’re thinking about that as we look forward – especially given the increase in digital penetration. And then also as we look into back to college, how are you feeling about the inventory levels there? Do you think you’re appropriately inventoried? Thanks. Gustavo Arnal: Yes. First on the store front, we continue seeing our business as an omni-channel business. So there is complement between the stores and our digital business. We’re happy with our digital business. We have significantly improved our capabilities on digital, and today, 40% of the revenue. So it has remained important and will continue to be so. For stores, what we will continue doing, but now even on an accelerated basis as Sue said, look at the four-wall profitability of our stores look at the geographic dispersion of them, see where they complement more or less, our buy online pick up a store, our supply to customers from the stores. And we will come up with a revised plan on that front. But this is a dynamic process. It’s just a dynamic process with these sales trends drive – takes us to a significantly higher sense of urgency. Okay. Susan Anderson: Great. Thank you. And just on the inventory front, heading into back to college too, if you feel that you’re appropriately inventory there to hopefully try and capitalize on some of the sales? Gustavo Arnal: Yes. That’s what Sue mentioned we’re keenly focused on. Our – we’ve spoken in the past of inventory not available to sell. It was stocking within our distribution centers. We were at about 30%. Last time we spoke, that area has improved. We’re now in the low 20s. We’re tracking in-stock availability of key items, not only in stores but also digitally. We are seeing some improvement. It’s gradual. And we are preparing for latter part of July and May and August, right, in our second quarter for back to college, and as I said, for the holidays in general, November, December. Susan Anderson: Great. Thanks so much. Sue Gove: Thank you. So I just want to wrap up with stating that, again, the next several months are going to be critical for us to take action on these immediate items around balancing our assortment, driving traffic, sales, inventory, costs, the balance sheet, all the things that we’ve talked about today. We really look forward to sharing with you our progress and appreciate your time. Thank you so much. Operator: Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.
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Bed Bath & Beyond Shares Surge 115% Since Q3 Announcement Despite Looming Bankruptcy

Bed Bath & Beyond (NASDAQ:BBBY) shares jumped more than 115% since the company’s reported Q3 results on Tuesday. This is despite the company reporting lower-than-anticipated financial results for Q3, with EPS coming in at ($3.65), significantly worse than the Street estimate of ($2.38). Quarterly revenue was down 33% year-over-year to $1.26 billion, compared to the Street estimate of $1.33 billion.

Retail investors caused the stock price to increase as they believe the company was a potential candidate for being bought out. The company stated it will cut additional workers as a means to lower expenses. This action follows the company's recent statement that it was considering filing for bankruptcy. The company announced on January 5th that the requirements for its exchange offer of unsecured notes were not fulfilled, and as a result, the company expressed doubts about its ability to remain a viable business due to current insufficient cash flow and lack of funds.

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The company provided its full-year outlook, expecting comparable sales to decline by approximately 20%. The company still expects to close 150 underperforming stores and is targeting at least 100 store closures by the end of 2022.

Analysts at Wedbush provided their views on the company following the earnings announcement. Against this backdrop, the analysts now estimate a $436 million adjusted EBITDA loss for 2022 (vs. prior $314 million loss) and free cash flow of ($1.1) billion (vs. prior ($620) million), driving liquidity to only around $740 million at the end of Q4. The analysts reiterated their Underperform rating and $5 price target on the company’s shares.

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According to the analysts at Wedbush, the company finds itself in an unenviable position as it faces steep market share losses, an overabundance of inventory, and dwindling cash reserves.

The analysts, who lowered their price target to $5 from $7 following the results, said that pushing too hard on an owned brand merchandising transformation proved hazardous for the company given very long order lead times compounded by external supply chain pressures.

The analysts believe the company would have been better served moving slower on merchandising, and first focusing on fixing its poor IT and supply chain systems.

Bed Bath & Beyond Shares Plummet 23% on Disappointing Q1 Results

Bed Bath & Beyond Inc. (NASDAQ:BBBY) shares plunged more than 23% on Wednesday following the company’s reported disappointing Q1 results, with EPS of ($2.83) coming in significantly worse than the Street estimate of ($1.32). Revenue was $1.46 billion, missing the Street estimate of $1.53 billion. Comparable sales dropped 23%, compared to the expected 19.4% decline.

According to the analysts at Wedbush, the company finds itself in an unenviable position as it faces steep market share losses, an overabundance of inventory, and dwindling cash reserves.

The analysts, who lowered their price target to $5 from $7 following the results, said that pushing too hard on an owned brand merchandising transformation proved hazardous for the company given very long order lead times compounded by external supply chain pressures.

The analysts believe the company would have been better served moving slower on merchandising, and first focusing on fixing its poor IT and supply chain systems.

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At the same time, accelerating freight costs through the quarter drove a gross margin miss, an issue that may pinch other retailers that have yet to report results for the August period.