Is It Too Late For Bed Bath & Beyond To Get Back On Track?

Bed Bath & Beyond (NASDAQ: BBBY) reported extremely disappointing Q3 results recently. The company reported $2.8 billion in revenues which declined 9% year-over-year (y-o-y), which followed a 7% decline in Q2. The first full week of the holiday shopping season (beginning on the Sunday before Cyber Monday) shifted from Q3 to Q4 in Bed Bath & Beyond’s 2019 fiscal year, which hurt sales and earnings to some extent. Also, the revenue decline was due to an 8.3% comparable sales decline in Q3. To break it down further – Comparable sales in-store were down in the high single-digit percentage range, while comparable sales through digital channels also fell in the mid-single-digit percentage range. It should be noted that this was a second consecutive fall in comparable sales consummated through digital channels.

BBBY is already struggling with margin pressure and declining store traffic amid competition from e-commerce and omnichannel competitors. To add to that, a decline in its digital presence will only suggest a weak prospect for the company going forward.

We have created an interactive dashboard on What Has Driven Bed Bath & Beyond’s Revenues & Expenses Over Q3, And What Can We Expect For Full-Year 2019? which outlines our forecasts for the full-year 2019. The retailer says it expects its sales and profitability to remain pressured during the upcoming Q4. The company’s management is pulling full-year guidance while it works on a go-forward strategic plan and absorbs the changes in leadership.

We expect BBBY’s 2019 revenues to decline and reach $10.9 billion, due to a continued decline in its physical store sales. BBBY’s revenue loss could be accompanied by lower total expenses (primarily due to lower technology investments) and could result in pre-tax profits to decline to almost negative $700 million. BBBY’s EPS has declined gradually since 2016, due to weak operating performance over these years. This year’s earnings are going to be down significantly due to revenue and margin deterioration.

Determining Stock Price

Our price estimate of $13.81 for BBBY’s stock is based on our Detailed Valuation Model, and implies a P/S multiple of 0.17x on expected 2019 Revenue Per Share (RPS) of $81.66. The company’s RPS has increased from $81.60 in 2016 to $89.57 in 2018 due to a decline in the number of shares outstanding. However, we estimate RPS to decline sharply to $81.66 in 2019 due to a steep fall expected in 2019 revenues.

While the Trefis estimate for Bed Bath & Beyond’s Valuation is below the market expectations, our estimate for Walmart’s Valuation indicates a significant upside.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis?  See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams