Bed Bath & Beyond Inc. (BBBY) recently initiated its latest round of layoffs in a desperate bid to cut its expenses. “As our strategic direction changes and we streamline our operations, it is necessary to right-size our organization to ensure we are equipped for the future. Unfortunately, this has necessitated making the difficult decision to say goodbye to some of our colleagues,” BBBY commented.

Moreover, despite declining inflation, U.S. retail sales fell more than estimated in December 2022. Reduced consumer spending and shrinking aggregate demand might limit BBBY’s growth.

BBBY has gained 31.4% over the past month. However, it has lost 75.9% over the past year and 33.7% over the past six months to close the last trading session at $3.39.

Here is what could shape BBBY’s performance in the near term:

Weak Financials

BBBY’s net sales came in at $1.26 billion for the third quarter ended November 26, 2022, down 33% year-over-year. Its gross profit decreased 58.3% year-over-year to $278.86 million.

Moreover, its adjusted net loss increased 1,248.3% year-over-year to $331.23 million, while its adjusted loss per share came in at $3.65, up 1,360% year-over-year.

EPS Expected to Remain Negative

Analysts expect BBBY’s revenue to decrease 29.2% and 13.6% year-over-year to $5.57 billion and $4.81 billion for the current fiscal year 2023 and the next fiscal year 2024.

Its EPS is expected to increase by 53.3% per annum for the next five years. However, its EPS is expected to decline 989.8% year-over-year to negative $11.77 for the ongoing fiscal year. In addition, its EPS is expected to remain negative in 2024. Also, it missed EPS estimates in all four trailing quarters.

Negative Profitability Margins

BBBY’s trailing-12-month EBITDA and net income margins of negative 7.94% and 20.54% are lower than the industry averages of 11.09% and 5.18%.

Furthermore, its trailing-12-month ROTC and ROTA of negative 15.55% and 28.99% compared with the industry averages of 6.59% and 4.54%, respectively.

POWR Ratings Reflect Bleak Prospects

BBBY has an overall rating of F, equating to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories.

BBBY has an F grade for Stability, in sync with its 24-month beta of 2.57.

It has a D grade for Quality, consistent with its negative profitability margins.

In the 60-stock Home Improvement & Goods industry, BBBY is ranked #58.

Click here for the additional POWR Ratings for BBBY (Growth, Value, Momentum, and Sentiment).

View all the top stocks in the Home Improvement & Goods industry here.

Bottom Line

BBBY reported bleak financials in its most recent quarter. It missed revenue and EPS estimates by 6.2% and 29.8%, respectively. Moreover, Wall Street analysts expect the stock to hit $1.36 in the near term, indicating a potential downside of 59.9%. Given the stock’s grim outlook, I think it is best to avoid BBBY.

How Does Bed Bath & Beyond Inc. (BBBY) Stack up Against Its Peers?  

While BBBY has an overall POWR Rating of F, one might consider looking at its industry peers, HNI Corporation (HNI), which has an overall A (Strong Buy) rating, and Haverty Furniture Companies, Inc. (HVT), ADT Inc. (ADT), and Bassett Furniture Industries, Incorporated (BSET), which have an overall B (Buy) rating.

BBBY shares were trading at $3.22 per share on Wednesday morning, down $0.17 (-5.01%). Year-to-date, BBBY has gained 28.29%, versus a 3.26% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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