Bed Bath & Beyond Hope: Can The Struggling Retailer Turn It Around Soon?

Bed Bath & Beyond Inc. BBBY shares continued to free fall on Thursday after a dismal third-quarter report. The results split sell-side analysts, with some convinced a new CEO will get the housewares chain turned around, but others warning they're still waiting for signs the company has turned a corner.

The Analysts

BofA's Curtis Nagle reiterated a Buy rating on the stock but lowered the target price from $24 to $21.

Morgan Stanley's Simeon Gutman stayed Equal-Weight on the stock and reaffirmed a $12 price target.

Wells Fargo's Zachary Fadem reiterated an Underweight rating and has a $12 price target.

KeyBanc's Bradley Thomas maintained an Overweight rating and $18 price target.

Wedbush analyst Seth Basham kept an Outperform rating on the stock with an $18 price target.

See Also: Weak Holiday Comp Sales Reports Drive Traditional Retail Stocks Down

The Theses

The bulls think the print wasn't as bad as it looks. Nagle noted 40% of the company's EPS miss was due to an accounting charge and that comp store sales were hit by a shorter holiday season. Comps from Thanksgiving to Cyber Monday were up 7.1%.

Also, it's still early days for new CEO Mark Tritton.

"With CEO Tritton only two months on the job and still in assessment mode of the business, we do not believe this is the quarter to judge the true health or potential of BBBY’s earnings," Nagle wrote in a note.

The question for analysts is becoming how long investors will give Tritton to turn it around.

Results Support BBBY Bears

The stock is up nearly 70% since Tritton became CEO in October. But the third-quarter results "lend more support for the bear case than the bull case in our view," Gutman wrote in a note. And strategic actions taken by Bed Bath and Beyond, such as selling off assets and buybacks, appear largely already priced in, Gutman said.

But Gutman remains Equal-Weight, holding out hope for 2020 improvement from a low 2019 base, and noting the stock is still pretty cheap even after the 70% rise.

Other Takeaways

Fadem said "poor results the largest incremental takeaway," with few concrete details on how to fix it.

"Tritton’s strong resume speaks for itself, and we look forward to hearing BBBY’s turnaround plan at its Spring 2020 analyst day. But until then, we believe visibility has worsened and would seize the opportunity to take profits."

Basham disagreed with Fadem, saying Tritton has outlined "credible drivers" for a transformation including online buy with in-store pickup, refining and curating of merchandising and selling non-core businesses among other things. "Pressures persist, but pivot is still to come."

Thomas thinks Bed Bath & Beyond is facing near-term challenges, but the new board and management team will find ways to sell more assets, including possibly World Market, cut more costs and find more merchandising and sourcing opportunities and eventually turn things around.

Price Action

Bed Bath and Beyond shares were down 19.4% to $13.42 at time of publication.

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