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Bed Bath & Beyond earnings: What to expect

Yahoo Finance Live’s Brian Sozzi provides his take on Bed Bath & Beyond earnings.

Video transcript

JULIE HYMAN: Bed, Bath & Beyond is set to report earnings after the bell on Thursday. The biggest question for investors-- will the turnaround plan pay off? It's no surprise that that's where we find Brian Sozzi's take today. And I also think we won't be surprised by his answer to that question.

BRIAN SOZZI: This is going to be a quick take because this is likely going to be a very disastrous quarter and earnings day for Bed, Bath & Beyond. Couple of things here that I'm looking at is Bed, Bath & Beyond shares down 35% over the past month into this report. First up, why this quarter will be awful. A couple of bullets here, let's fire them on up. First, stores are in disarray due to merchandise shifts. Here's a company trying to suck out all the private label merchandise that it tried to sell over the past year, now bringing back the brand name merchandise. When you walk into these stores, there's just a mismatch of goods here, mismatched consumer message. Ultimately, that is impacting sales and profit margins.

Next, home goods demand is weakening. RH reported just a couple of weeks ago. They warned about a continued slowdown in home related goods. Now, if RH is being impacted by this on the high end of the business, best believe that Bed, Bath & Beyond on the much lower end is being impacted by the same trends. And then lastly here, of course, inflation. Bed, Bath & Beyond, all home goods retailers continue to deal with a large amount of inflation in the supply chain.

Now, breaking it down outside of just the broader things, a couple of further bullet points. Some top things to look at Bed, Bath & Beyond specifically. As Julie mentioned, this is, in fact, a-- I wouldn't even call it a turnaround play. This is a survival play. It is really yet to be determined if this company makes it deep into next year. And to that end, you want to look at gross profit margins, will likely be down significantly year over year. Inventory, I would not be surprised if it is up significantly year over year because of the plunge, the absolute plunge in sales.

Cash levels-- the company did finish raising $500 million recently, but you want to look at how much cash they burn through in the most recent quarter to see how much they will burn through in non-holiday periods for next year. And then lastly, guidance of any. I'd be shocked if you get any form of current quarter guidance or full year guidance from Bed, Bath & Beyond, just given the volatile trends it's seeing in its business and as it tries to, ultimately, prevent itself from going out of business.

BRAD SMITH: All right, so all of this at a time where we're seeing less bids on existing homes. And of course, homes and sales there that would dovetail into Bed, Bath & Beyond's business because then, foreseeably, people would be having to furnish those homes or just get some items from Bed, Bath & Beyond to put in those homes. So what's the take?

BRIAN SOZZI: Yeah, if you're trying to turn around a home goods retailer, now is not the environment when you have the 30-year mortgage touching, what, over 6%? But my take is this. If you are-- wow, the team is just great. I just love working with these folks. It's just absolutely amazing. Why bother? And the point there is being is this. You have the broader industry going against Bed, Bath & Beyond. You have a company that is on life support here that could probably fall underwater. That would be like me going underwater right there.

If you were inclined to play home goods for whatever reason, and then you want to ignore everything I'm telling you here, look to stronger companies like a Williams-Sonoma. They've been doing a lot of good things. You look at RH. They, of course, warned a couple of weeks ago. But still, fundamentally, they are a lot stronger than Bed, Bath & Beyond.

JULIE HYMAN: Now I just want a nice, hot bath.

BRAD SMITH: Yeah.

BRIAN SOZZI: I'm a bath guy. I like baths. They're cool, yeah.

BRAD SMITH: All right.

BRIAN SOZZI: Too much?

BRAD SMITH: No, I've already got your Christmas gifts lined up, then. Holiday gifts--

BRIAN SOZZI: I appreciate it.

BRAD SMITH: I know exactly what I'm getting now.

JULIE HYMAN: Bath bombs.

BRAD SMITH: Yes, done.

BRIAN SOZZI: Give me the circle, like the balls, the bath balls.

JULIE HYMAN: Yeah, that's what-- yeah.

BRAD SMITH: Oh, yeah, but you need the bubbles, too. All right?

BRIAN SOZZI: I like bubbles.

BRAD SMITH: So I'll get you the bubbles and the bath bomb. All right.