Bed Bath & Beyond: KeyBanc Remains Underweight Amid Weak Sales, Margins

KeyBanc reiterated its Underweight rating on Bed Bath & Beyond Inc. BBBY following the company's first quarter earnings miss and continued deterioration in sales and margin trends.

"We continue to remain cautious looking forward as BBBY faces competitive pressure and structural headwinds," analysts at KeyBanc wrote in a note.

The analysts noted that though the company did not formally lower FY16 EPS guidance, it did temper previous comments. The company now sees EPS to be "comfortably" within the $4.50 - $5.00 range (vs. at the high end previously). Street expects EPS of $4.99 for fiscal 2016.

The brokerage trimmed its FY16 view to $4.95 from $5.05 and FY17 EPS estimate to $5.20 from $5.30.

Full-year comps outlook was lowered and it now projects comps to be flat to +1 percent (vs. 1-2 percent previously).

Bed Bath & Beyond's first quarter EPS came in at $0.80, down 14 percent, and $0.06 below expectations. Comps of -0.5 percent were below Street estimates of +0.6 percent. Gross margin rate of 37.4 percent was below Street estimates (-75bps deleverage y/y vs -60bps in consensus estimates).

"Management's earnings call reaffirmed our view that margins will stay pressured for the foreseeable future," the analysts added.

At time of writing, shares of Bed Bath & Beyond were down 0.46 percent to $42.98, while KeyBanc analysts have a price target of $35.