According to the findings of a recent study conducted by Goldman Sachs analyst Kate McShane, Bed Bath & Beyond (BBBY Stock) is still in the last stages of its existence as a business and will have a very tough time turning itself around.
BBBY Stock Decline and Drop in Sales
The most recent quarter for the business that is having financial difficulties highlights the retailer’s dangerous fundamental condition before the busiest shopping season of the year.
Comparable store sales plummeted by 26% in comparison to the same period a year earlier as a direct result of the economic slowdown as well as poor inventory quality. Because of the difficulties in the firm’s top line as well as the increased discounting, the company reported an operating loss of $168 million for the quarter.
The price of BBBY stock (NASDAQ:BBBY) has fallen by 58% so far in 2022.
McShane is skeptical of the confidence shown by the company’s executives during the results call.
“Although we believe Bed Bath & Beyond (NASDAQ:BBBY) sounded more constructive with regards to the opportunity in bringing back more national brands gradually,” “We predict increased stocks of home goods at discounters (i.e., Big Lots and Ollie’s Bargain Outlets), as well as a probable more promotional environment in retail overall, which could further weigh on margins,” says the company.
McShane continued by saying that “there could be upside if the company is successful in finding more cost savings (which in our management call back they indicated was possible),” which could help offset this potential pressure and further the company’s goal of reaching breakeven cash flow by the end of the fourth quarter.
According to McShane’s modeling, Bed Bath & Beyond (NASDAQ:BBBY) will continue to be a money-losing operation well into the year 2023.
According to the letter, “We updated our projections following the profits lost during the second quarter and reaffirmed our view for the fiscal year 2022.” “We are revising our forecast for adjusted EBITDA for FY22 down to ($470 million) from ($326 million). The primary reason for this change is that we anticipate continued lower same-store sales as a result of weakening demand trends across the home furnishings industry. In addition, we anticipate a decline in gross margin in the midst of a promotional environment. In addition, we are revising our projections for the adjusted EBITDA for FY23 and FY24 downward to ($28 million) and $64 million, respectively.”
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