Bed Bath & Beyond earnings will feel the pressure of heavy discounting and light traffic, analysts say

With fiscal third-quarter earnings scheduled for Thursday, analysts say Bed Bath & Beyond Inc. could get squeezed by promotions and traffic pressure.

“We have seen a very meaningful ramp in Bed Bath & Beyond’s promotions through F3Q and December, including a free Beyond+ Membership program (previously $29 fee), giving customers free shipping and 20% off every purchase,” wrote Bank of America analysts in a Tuesday note.

Analysts say shipping fees had also been cut and minimum purchase thresholds for delivery were lifted.

“We’ve received a number of other outsized promotions including 25% off an entire BOPIS (buy online, pick up in store) order and 25% off an entire order using Klarna (which could be stacked with a 20% off coupon for 40% off),” the note said.

Klarna is a buy-now-pay-later service.

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“This is especially concerning given management’s plan was to shift away from

Bank of America rates Bed Bath & Beyond

stock underperform and cut its price objective to $11.50 from $14.

Analysts also expressed concern about customer foot traffic.

“Store traffic was light on Black Friday despite a 25% off entire purchase promotion,” Bank of America said.

Bank of America suspects seasonal items arrived late, leaving much of it on the sales floor, unsold, on Christmas Eve.

“The ubiquitous 20% off coupon remains a drug that Bed Bath & Beyond cannot kick,” wrote Wedbush analysts in a note.

Analysts say promotions “intensified” year-over-year in December, and store traffic decelerated 5,000 basis points during the first three weeks of the month, which online sales will not counterbalance.

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“While expectations are low, we see limited drivers of upside on the print, as we expect a sales and earnings miss and guide down and signs of additional market share losses,” wrote analysts led by Seth Basham.

“These negatives are unlikely to be offset by growth opportunities in Baby and marketplaces as well as potential for more aggressive share repurchases.”

Bed Bath & Beyond’s portfolio includes the namesake chain of home goods stores, Buy Buy Baby and Harmon.

Wedbush rates Bed Bath & Beyond shares neutral with a $14 price target, cut from $18.

Bed Bath & Beyond stock sank after the company’s fiscal second-quarter report, with executives detailing a variety of problems, including an unexpected traffic slowdown and global supply chain challenges.

“[R]ecovering by November and delivering a strong holiday is our key focus,” Chief Executive Mark Tritton said at the time.

UBS is pessimistic about both the third quarter and the fourth.

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“Looking ahead, the market will likely need to see evidence Bed Bath & Beyond can generate positive comps while managing its profitability in the face of slowing industry demand & stubbornly high costs,” wrote UBS in an earnings preview note.

“In our view, its 3Q results & 4Q guide are unlikely to inspire confidence that
this can be achieved in ’22, especially as the industry backdrop gets tougher.”

Bed Bath & Beyond stock slipped 1.1% in Tuesday trading, and have slumped 24.1% over the last 12 months.

The benchmark S&P 500 index

has rallied 28.6% for the past year.

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