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Still Unclear When Bed Bath & Beyond's Initiatives Will Bear Fruit

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Bed Bath & Beyond Inc. (NASDAQ: BBBY) has undertaken initiatives focused on competitive pricing, shipping policies, technology enhancements as well as differentiated and exclusive products, there is uncertainty around when these benefits would begin “bearing fruit,” Barclays’ Matthew McClintock said in a report. He added that there was growing margin pressure.

Analyst Matthew McClintock maintained an Equal-Weight rating for the company, with a price target of $50.

Bed Bath & Beyond reported its 1Q16 EPS at $0.80, representing a 14 percent y/y decline, due to margin pressures and the shift of the Memorial Day Weekend into 2Q16. Revenue came in flat at $2.74B, while comps declined 0.5 percent, on account of a downturn in transactions and a slight increase in average transaction amount. The company reduced its comp guidance for FY16 to flat to 1.0 percent, from 1.0-2.0 percent.

Margin Pressure

Operating margin contracted 220 bps to 7.8 percent, with gross margin down 70 bps to 37.4 percent due to a decline in merchandise margins and an increase in coupon redemptions, average coupon amount and DTC shipping expense, McClintock mentioned.

Bed Bath & Beyond’s operating expense rate increased 150 bps to 29.6 percent, partly driven by payroll expenses, and the company expects wage pressure to continue. The analyst added that the One Kings Lane acquisition is expected to be slightly dilutive to FY16 earnings.

Latest Ratings for BBBY

May 2017Loop CapitalUpgradesSellHold
Dec 2016Raymond JamesDowngradesStrong BuyMarket Perform
Dec 2016Loop CapitalInitiates Coverage OnSell

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Posted-In: Barclays Matthew McClintockAnalyst Color Reiteration Analyst Ratings


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