The earnings report from Wednesday showed $0.93 in earnings per share (EPS) on revenue of $2.66 billion. A year ago, the company reported EPS of $0.93 on revenue of $2.61 billion. Thomson Reuters had consensus estimates of $0.94 EPS and $2.69 billion in revenue. Same-store sales for the quarter rose by a paltry 0.4%, but that was against a rise of 3.4% in the first quarter a year ago.
It gets worse on guidance. Bed Bath & Beyond sees earnings of $1.08 to $1.16 per share in the coming quarter and net earnings will rise by “a mid single digit percentage” for the year. Thomson Reuters was looking for second-quarter EPS of $1.20 and full-year EPS of $5.05.
What is sad here is that even a share buyback is only limiting the decline. The company is losing money on its repurchases. It spent $273 million on buying back common stock during the quarter — again, shares hit a 52-week low on Thursday of $54.96. Bed Bath & Beyond has some $861 million remaining in its existing share buyback program.
We cannot understand why Bed Bath & Beyond does not pay a dividend either. The main issue killing investors here is that the company cannot even clear a very low bar that it sets for itself to meet. What happens when you are a value stock that has trouble meeting your own sand-bagged guidance?
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Our own Paul Ausick said of the report:
As we noted when BB&Y missed expectations at the end of the previous quarter, the secular growth story here has reached its end and with a forward multiple of around 11, the company wants to stake its claim as a value stock. That hasn’t happened yet.
The reality is that value investors remain scared here. This is where being a value stock at 10 times or 11 times earnings is an obvious value trap rather than being a value stock — even to novice investors. In our dead retailer synopsis, we noted that the company is struggling against intense competition from Amazon and that its new growth opportunities may be limited because it already operates in all 50 states. The stock was at $63.72 then (on April 12), and shares are closer to $55.50 on a 9% drop after earnings, and it is down from a 52-week high of $80.82.
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