Is BBBY Approaching Another Earnings Miss?

(photo credit: Mike Mozart)

Bed, Bath and Beyond will report its FQ1’15 on Wednesday, after slow revenue growth over the last year. Estimize is predicting an EPS figure of $.95 and Wall Street is forecasting $.94, both above the company guidance of $.93. In terms of revenue, Estimize predicts $2.744B, and Wall Street is forecasting a markedly higher figure of $2.746B. It should be noted, however, that Bed, Bath and Beyond has been significantly underperforming both Estimize and Wall Street’s predictions for the last two quarters. In this case, the company guidance is way below the two other predictions, at $2.724B.

FQ1 is habitually the weaker quarter for Bed, Bath and Beyond, which has expectedly led to negative QoQ EPS & growth figures. However, the industry as a whole has been dealing with minimal growth rates this year. Some contributing factors include margin pressure due to competition with online retailers, coupon expenses, and direct-to-consumer shipping costs. Moreover, there have been ongoing foreign currency headwinds, influencing domestic revenues. Also harmful this year was the West Coast port slowdown and frigid weather hitting many regions in February. Although Bed, Bath and Beyond was able to discover alternative shipping routes, the two additional factors caused a significant decline in company sales.

Not only is Bed, Bath and Beyond influenced by the several industry barriers, but there are also company-specific earnings impediments. For one, currency fluctuations in Canada have undermined the company’s sales progress, and it continues to have an unfavorable effect on sales this quarter. Furthermore, returning to the industry competition of online retailers, Bed, Bath and Beyond has too invested in online retail, which has been an added company expense due to increased technology costs. Moreover, the company could still be coping with the unfavorable impact of last year’s credit card litigation settlement fee.

The upcoming report should shed some light on how the company is coping with these external pressures. We recommend watching BBBY’s result closely, as investors and analysts could be very disappointed by continued underperformance. On the other hand, the announcement could also be a catalyst for the stock, leading to a positive turnaround that the company greatly needs.