Bed Bath & Beyond (BBBY) Tops Q2 EPS by 82c

Bed Bath & Beyond (NASDAQ: BBBY) reported Q2 EPS of $0.50, $0.82 better than the analyst estimate of ($0.32). Revenue for the quarter came in at $2.69 billion versus the consensus estimate of $2.56 billion.

• Comparable Sales Growth of 6%, with Strong Comp Sales Growth from Digital Channels of 89%

Outlook

Given the ongoing uncertainty related to the impact of the COVID-19 pandemic, including around consumer behavior especially during the upcoming holiday season, the Company maintains its position of not providing fiscal 2020 financial guidance. It is closely managing operational costs, including working capital to ensure it can remain agile and adjust to any unexpected changes in the market. The Company continues to believe it has a strong financial position to manage through these uncertain times.

As previously disclosed on July 14, 2020 in an Investor FAQ Document, Bed Bath & Beyond plans to accelerate its comprehensive restructuring program to drive profit improvement over the next two-to-three years. It expects to achieve significant annualized improvement in Earnings before Interest, Income Taxes, Depreciation and Amortization (EBITDA) of between approximately $250 million to $350 million, excluding one-time costs. This is in addition to the expected $85 million in SG&A savings associated with the strategic restructuring program announced in February 2020. Importantly, the Company has assumed reinvestment of between approximately $150 to $200 million of the expected cost savings into future growth initiatives.

Key components of the additional expected profit improvement include:

• Approximately $100 million in annual savings from its previously described Store Network Optimization project which includes the closure of approximately 200 mostly Bed Bath & Beyond stores over the next two years. These stores collectively generated about $1 billion in annual net sales in fiscal 2019, and many of them were EBITDA negative by the end of fiscal 2019. The Company expects to be able to transition at least 15% to 20% of these sales to its digital channels or other store locations.
  • The Company continues to believe that its physical store channel is an asset for its transformation into a digital-first company, especially with new omni-fulfillment capabilities in Buy-Online-Pick-Up-In-Store, Curbside Pickup and Same Day Delivery.
• Approximately $200 million in annual savings from product sourcing, through renegotiations with existing vendors.
• Approximately $150 million in annual SG&A savings from continued optimization of its corporate overhead cost structure and reductions in other discretionary expense.
  • As previously disclosed on August 25, 2020, the Company announced that it had executed a workforce reduction of approximately 2,800 roles from across its corporate headquarters and retail banner stores and expects this action to generate future annual pre-tax cost savings of approximately $150 million, which is at the upper end of the Company's initially stated range of $100 to $150 million dollars in annual SG&A savings described above. This action was designed to further reduce layers at the corporate level, significantly reposition field operations to better serve customers in a digital-first shopping environment, as well as realign technology, supply chain and merchandising teams to support strategic growth initiatives.

In addition to these cost savings, the Company expects to generate deeper assortment, sourcing and supply chain opportunities as it pursues growth in owned brands.

On a preliminary basis, monthly sales for September show positive comparable sales growth, with similar store and digital sales as in the second quarter and accelerated BOPIS trends.

For earnings history and earnings-related data on Bed Bath & Beyond (BBBY) click here.

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