Bed Bath & Beyond Misses Q1 Earnings and EPS Estimates

Bed Bath & Beyond (NASDAQ:BBBY) reported weaker than expected first quarter fiscal 2016 results on Wednesday, June 22. The company reported flat net sales of $2.74 billion, which missed the Reuters’s consensus estimate by $40 million. The company posted earnings of $0.80 per share which decreased 14% year-over-year (y-o-y) and also missed the consensus.

Comparable sales for the quarter decreased 0.5% compared to a 2.2% increase in the prior year. Although comparable sales from digital channels grew in excess of 20% in this quarter. Bed Bath & Beyond acquired e-commerce home furnishing startup One Kings Lane for an undisclosed amount last week; this acquisition, coupled with further investments in its online presence, should help the company improve on its digital capabilities in the near future.

Bed Bath & Beyond is dealing with headwinds like many other retailers in the market. Gross margin declined this quarter to 37.4% compared to 38.1% in the prior year quarter. Gross margins have been declining in the last three years, as seen from the table below. Increases in technology-related costs, additional store setup costs, higher compensation costs and advertising expenses have led to reduced margins and profits for the company.