New York (CNN Business) – Retailers usually want their sales numbers to be red, not their customers. But Bed Bath & Beyond is said to be dealing with cold momentum and hot customers in its stores.
A new report from Bank of America says the company has been cutting air conditioning in an effort to cut expenses quickly to offset the drop in sales.
Bed Bath & Beyond told CNN that no changes to stored temperature guidelines have come from the company. “We have been contacted about this report and, to be clear, none of the Bed Bath & Beyond stores have been directed to modify their air conditioners and there have been no changes to company policy regarding use of the facilities,” a representative said.
However, Bank of America analysts who have visited stores reported growing concerns, including drastically reduced hours, reduced facilities, reduced store openings, and canceled remodeling projects. Rewards programs have also been scaled back and replaced. Analysts expect Bed Bath & Beyond management to soon announce more store closures and halt the opening of Buy Buy Baby stores.
Meanwhile, sales and price cuts are multiplying. The company continues to offer high promotions, including up to 50% off bedding and furniture, free same-day shipping, $10 off purchases of $30, and 20% off purchases of college students and their parents.
But analysts at Riley Securities don’t see these sales promotions as helping much. They dramatically lowered their price target for the retailer’s stock to $7 from $17, citing a drop in store traffic. They said the easing of coronavirus restrictions meant that demand for household goods had fallen and supply chain problems had led to a shortage of inventory to attract customers. Analysts noted that competitors such as Walmart and Target saw their traffic remain flat, while Bed Bath & Beyond fell 20% to 30% year over year.
The changes come ahead of the home goods retailer’s first-quarter report, due this week, and follow a devastating report for the fourth quarter, in which sales fell 22%.
Mark Tritton, CEO of Bed Bath & Beyond, said the unavailability of some products due to supply chain issues led to an estimated $175 million in lost sales during the period.
Bank of America analysts believe sales will fall another 20% this quarter.
“The company has underperformed the industry and we believe the estimates are in line [de una caída de las ventas del 18%] He could be optimistic,” they wrote.
Zacks Equity Research’s consensus estimate for the retailer’s earnings now stands at a loss of $1.28 per share, down 2,660% from a year ago. According to the financial research firm, Bed Bath & Beyond has had a surprisingly negative average profit over the past four quarters of 4,700%.
Among other factors of concern to the company are the resignations of two key financial executives in recent months, chief accounting officer John Parisi resigned in May, and Heather Plotino, senior vice president of planning, financial analysis and trade finance, also left the company.
According to Bank of America analysts, a sale of the Buy Buy Baby sub-brand also seems less likely. Activist investor RC Ventures, who owns nearly 10% of Bed Bath & Beyond shares, called for the brand to be sold earlier this year, and buyers expressed interest. However, analysts do not believe that interest can withstand these latest hiccups. “We continue to face challenges in closing a deal given BBBY’s deteriorating financial position and high yield margins,” they wrote.
Analysts at Riley Securities said they believe selling or laying off the company could generate between $1.5 and $2 billion in value, but they no longer believe a sale is imminent because the business is nearing completion.
Although the retailer is likely to see more faltering quarters, there is still hope, according to analysts.
Triton took over as CEO of the Home Appliances business after leaving his job as Commercial CEO of Target in November 2019 and quickly put together a massive transformation plan.
He announced a roadmap to close a flagship store, made executive changes and led asset sales for companies like Christmas Tree Shops and Cost Plus World Market. The company said it will spend about $250 million to renovate about 450 Bed Bath & Beyond stores to make shopping easier and make products more accessible.
“Transformation is taking longer than expected to achieve due to supply chain challenges and entry into a more challenging retail operating environment,” wrote analysts at Riley Securities, but we believe Bed and Bath & Beyond is heading in the right direction.