Bed Bath & Beyond, the once-hot meme stock, has fallen to a new 52-week low in early US price action today. The company posted disappointing results for its fiscal first-quarter 2022 and also announced the ouster of its CEO Mark Tritton.
This marks yet another high-profile exit at the company. In re cent months, its chief accounting officer John Barresi and, senior vice president of financial planning and analysis and commercial finance, Heather Plutino have also quit the company.
Bed Bath & Beyond reported a 25% YoY drop in its net sales in the quarter ending May 28. Also, comparable sales, which is a key metric for retail companies, plummeted by 23% in the quarter. The company’s adjusted gross profit margins also fell from 34.9% to 23.8%. The company ended the quarter with total cash of only $107 million but hinted that it is looking at asset sales to shore up its balance sheet.
Bed Bath & Beyond announced that Sue Gove would take over as the interim CEO as the company hunts for a new CEO. In her prepared remarks, Gove said, “I step into this role keenly aware of the macro-economic environment. In the quarter there was an acute shift in customer sentiment and, since then, pressures have materially escalated.” She listed inflation and changes in consumer buying habits as the key headwinds. Notably, other retailers have also pointed to a slowdown in sales of discretionary products.
As the economy has reopened consumers are spending more on outdoor merchandise. Also, the spiraling inflation has prompted many households to cut down on discretionary expenses. Gove however admitted “The simple reality though is that our first quarter’s results are not up to our expectations, nor are they reflective of the Company’s true potential. The initiatives we are instituting today are just the first steps in putting our business on firm footing to drive our future success.”
Bed Bath & Beyond is Another Meme Stock to Bite the Dust
Bed Bath & Beyond topped the list of stocks that Reddit traders were recommending in 2020 and 2021. The company also seems to turn around its business operations as sales at its stores were strong. However, 2022 has been a reality check for all meme stocks. BlackBerry stock has also crashed. However, unlike Bed Bath & Beyond, BlackBerry posted better-than-expected earnings last week.
Wall Street analysts are also bearish on Bed Bath & Beyond stock and the majority of them rate the stock as a hold or a sell. Recession fears have been rising which is taking a toll on stocks like Bed Bath & Beyond. Most brokerages have raised their odds of a US recession but President Joe Biden and members of his cabinet don’t see recession as imminent. Federal Reserve chair Jerome Powell has also said that while a recession is not certain, its probability would increase given its aggressive rate hikes.
Bed Bath & Beyond Provided Outlook
Commenting on its outlook, Bed Bath & Beyond said that it expects comparable sales recovery in the second half of the fiscal year “driven by inventory optimization plans, including incremental clearance activity.” It also expects its adjusted SG&A (selling general and administrative) expenses to fall as compared to the previous year as it realigns its cost structure to its sales.
Notably, Bank of America had previously said that Bed Bath & Beyond is turning off air conditioning in stores to lower its overhead expenses. The brokerage also said that the company is lowering store timings and has scaled back its reward program. While Bed Bath & Beyond has denied any corporate diktat to turn off ACs at stores, Bank of America found them during their store visits. It also forecast that the company would shut more stores in the coming weeks to reduce its expenses.
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