What To Expect From Bed Bath & Beyond’s Q4 Earnings
Bed Bath & Beyond (NASDAQ:BBBY) is scheduled to announce its fiscal fourth quarter earnings on Wednesday, April 5. The company started the year on a weak note, as both its revenue and earnings per share missed analyst estimates for three straight quarters in 2016, primarily due to increased technology-related expenses, higher compensation costs and a fall in the company’s comparable sales. In Q3, the retailer reported a marginal increase in revenue to $2.96 billion, primarily due to 1.5% year-over-year (y-o-y) growth in non-comparable sales, including new stores and the One Kings Lane acquisition, partially offset by a 1.4% y-o-y decrease in its comparable sales. The company also posted diluted earnings of 85 cents per share, which declined 22% y-o-y.
In the first nine months of 2016, Bed Bath & Beyond reported more than a 20% increase in its comparable sales growth from customer-facing digital channels over the corresponding period in the prior year. However, this increase was not able to offset the company’s declining foot traffic from its physical stores, and as a result its comparable store sales declined 1.1% in fiscal 2016 so far. We expect this trend to continue in the fourth quarter as well.
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Margin Pressures Could Continue
Bed Bath & Beyond’s gross margins continued to face pressures in the first nine months of fiscal 2016. The company identified a decline in merchandise margins, an increase in coupon redemption (which it has been using to attract customers in response to price competition from online retailers) and an increase in net direct-to-customer shipping expenses (as a result of more promotional shipping) as the primary factors behind this decline. In addition, the inclusion of One Kings Lane and PMall also weighed on the company’s gross margins. Going forward, we expect this decline in gross margins to continue into the fourth quarter as well. As a result, the company’s full-year gross margin could be relatively flat relative to fiscal 2015.
Future Outlook
Reuters’ compiled analyst estimates forecast revenues of $3.50 billion and earnings of $1.77 per share for Q4 2016, implying growth of about 2% and (4)%, respectively.
For full year 2016, Bed Bath & Beyond continues to forecast its earnings per diluted share in the range of $4.5 to $5.0. The company estimates a full-year comparable sales decline of approximately 50 basis points, with net sales increasing about 1%.
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