Bed, Bloodbath And Beyond: BBBY Crashes After Missing Wildly; Slashes Revenue, EBITDA And EPS Forecasts

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by Tyler Durden
Thursday, Sep 30, 2021 - 08:24 AM

Having spent much of the summer warning that as a result of surging labor costs, commodity prices and generally "transitory hyperinflation", corporate margins would tumble (which in the view of Morgan Stanley would lead to a 20% market drop), almost one month ago we warned that we are about to see a surge in profit warnings as the realization that the current unprecedented ascent in prices is going to be anything but transitory.

Sure enough, shortly after we noted that "Profit Warnings Are Coming Fast And Furious As Q3 Profits Brace For Big Hit" it wasn't until Nike and FedEx's dismal outlooks that the world finally paid attention to the coming stagflationary wave.

Today we got another high profile admission that the non-transitory stagflationary environment is here to stay when retailer Bed Bath & Beyond crashed over 15% in premarket trading after slashing its full year forecasts for net sales, adjusted Ebitda and EPS. Its third quarter EPS and net sales forecasts also missed the average analyst estimates.

But before we get there, first a look at the just concluded quarter which was just as ugly and confirms that US consumers were already hunkering down in the current quarter amid a shortage of stimmies and the mass media-induced Delta variant panic:

  • Adjusted EPS 4c, missing estimates of 52c, far below the lowest end of the range which was 48c to 56c
  • Net sales $1.99 billion, missing estimates of $2.06 billion (range $2.04 billion to $2.08 billion)
  • Adjusted gross margin 34%, missing estimates of 35.6%
  • Adjusted Ebitda $85 million, badly missing the estimates $156.2 million (range $150.0 million to $162.0 million)
  • Comparable sales -1%; Bed Bath & Beyond Banner comparable sales -4%

But it was the company's forecast that was especially ugly, first the third quarter, where it now sees:

  • Adjusted EPS $0 to 5c, estimate 28c (range 18c to 40c) (Bloomberg Consensus)
  • Net sales $1.96 billion to $2 billion, estimate $2.02 billion (range $1.88 billion to $2.19 billion)
  • Adjusted Ebitda $80 million to $85 million, estimate $117.6 million (range $102.0 million to $136.0 million)
  • Adjusted gross margin 34% to 35%, estimate 35.4%

And then the full year:

  • Sees net sales $8.1 billion to $8.3 billion, saw $8.2 billion to $8.4 billion, estimate $8.30 billion (range $8.22 billion to $8.40 billion)
  • Adjusted EPS 70c to $1.10, saw $1.40 to $1.55, estimate $1.52 (range $1.41 to $1.62)
  • Adjusted Ebitda $425 million to $465 million, saw $520.0 million to $540.0 million, estimate $530.3 million (range $521.0 million to $538.0 million)
  • Sees adjusted gross margin 34% to 35%, saw about 35%

CEO Mark Tritton was laconic: “Following solid growth in June, we saw unexpected, external disruptive forces towards the end of the quarter that impacted our income.”

The delta between the market's rosy expectations and the reality was about 15% because that's how big the drop in BBBY stock was premarket.