Bed Bath & Beyond falls short of earnings estimates

Brian Sozzi and Julie Hyman break down Bed Bath & Beyond's stock taking a hit after the company's guidance was cut due to a less than stellar earnings report.

Video transcript

[MUSIC PLAYING]

JULIE HYMAN: Folks, we've been talking about it. We've been teasing it all show long. Now, it's time to dig into it a little bit. I'm talking about Bed Bath & Beyond and the company's numbers that missed estimates. You've been bringing that up this morning, Brian, as an example of a company among many, right? We've been hearing from a lot of companies that have been missing.

I think what's different about Bed Bath, and you see though that earnings per share number really a big miss, revenue a smaller miss there. What's different for Bed Bath & Beyond, for me, than some of these other companies we've been hearing from is that, yes, it's having supply chain issues, but it's also having demand issues. And that's not something we've heard so much from other companies.

And the CEO of the company, Mark Tritton, who I know you have spoken to many times and I believe you're talking to later today, said that foot traffic was a problem for them because of the Delta variant. We've been hearing, I feel like, less of that kind of commentary as of late. So, this one really stands out for me.

BRIAN SOZZI: Julie, this a-- this is just, wow. I think our former anchor, Myles Udland, is tuning into this analysis, and I was just texting with him. And all I have to say to him is, wow. This is a really surprising earnings miss, the magnitude of it. Now, Julie, they also warned significantly in the third quarter and for the full year.

So, you're now starting to worry how Bed Bath is going to do for the holiday shopping season. But a couple of concerning things here from this release. One, to your point, they're noting traffic really weakened towards the latter part of the quarter. Also noting they saw unexpected external disruptive forces towards the end of the quarter. That is not common commentary. I'm used to hearing from CEO Tritton.

So, I'm going to ask a little more about it when we catch up later this afternoon. But Julie, maybe you can-- I think you would find this interesting. The important markets for Bed Bath & Beyond, among many, are Florida, Texas, and California. Let's leave California outside of this. Florida and Texas, what are they?

I mean, they are essentially two states that I'm are not necessarily wanting to follow along on people wearing masks or getting vaccinated. Well, those-- those markets were very challenging for Bed Bath & Beyond in the most recent quarter as the Delta virus spread and really hammered those two markets. So, the pandemic is continuing and it's continuing to wreak havoc on foot traffic at retailers, and also their supply chains, of course.

Now, the good thing here, if you want to have any positive takeaway here, Julie, and I know I'm long overdue for something positive today, they did have close to a billion dollars in cash. So, this is not a company on its last legs. They are not going to have to raise more debt or raise more cash. They have the balance sheet to withstand some of the pressures they're seeing in their business. But again, I think this is a huge shock to a lot of believers in the Bed Bath & Beyond turnaround story.

JULIE HYMAN: Yeah, and indeed Tritton also said that the turnaround story is still intact here. So, this is-- we'll see if it's a blip, but this is-- he's still sort of keeping an eye on the long term. One more note I wanted to mention on Bed Bath & Beyond that I found interesting, Brian, short interest, relatively high. So, it has about 5%-- let's see, 22.7% of its shares sold short.

So, there might be believers in this company, but there's also an awful lot of people who are sort of betting on it not to succeed, which is sort of interesting here, given that it had been performing before these numbers just coming out. Well, we're coming up on the opening bell in just a second here on this Thursday, last day of the quarter. You see there Valens celebrating its listing, ringing the opening bell this morning.

As we close out the quarter, as we've been talking about, Soz, for the Dow and the NASDAQ, it's going to be a squeaker. We don't know if they're going to finish the quarter positively or negatively. The S&P 500 a little more solidly higher on the quarter with the 1.4% gain. But really a lot of the challenges for the market have come in the last, what, three weeks or so, when we have seen this turbulence come anew.

BRIAN SOZZI: Right, Julie. And I just-- I really-- I want to get back to Bed Bath real quick, final point in this too. It's really the type of shocking quarter that, you know, you'll also have to think about, well, a lot of other retailers are likely in the same boat. It's an overstock, it's an Etsy, it's a Wayfair, it's an Ethan Allen, it's a La-Z-Boy. A lot of these companies essentially their supply chains in many respects are very similar.

So, Bed Bath & Beyond is warning about supply chain problems and inflation, you know, they warned about a good pickup in freight inflation. We're hearing that from a lot of other retailers. It's not just a Bed Bath & Beyond here execution issue. And this is going to impact, or probably is impacting, the home furnishing space a lot more than market-goers are expect. So, I wouldn't be surprised to see a lot of those stocks under pressure today.