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Bed Bath & Beyond Inc. (NASDAQ: BBBY) reported net income for the third quarter of 2022 as sales fell and losses widened. The company has been struggling for some time now and the latest earnings announcement does not give much hope for its prospects. Last week, the company said uncertainty could continue to be a concern. However, the stock was up 21% on Tuesday.
Quarterly performance
For the third quarter of 2022, Bed Bath & Beyond reported net sales of $1.25 billion, which was down 33% from the previous quarter and below market estimates. Comparable sales were down 32%. The top line is hurt by lower stock positions of approx. 70% and reduced customer traffic. Adjusted loss per share was more than expected at $3.65.
Prevail
Bed Bath & Beyond has overhauled its range by reducing its own brand merchandise and shifting more to national brands to generate sales. Owned brand inventory penetration has declined 10 percentage points compared to peak levels during the first half of the fiscal year.
The company has held clearance sales at stores that are closing to reduce inventory levels. BBBY is on track to close about 150 stores by the end of fiscal year 2022. Gross margin in Q3 fell to 22% from 35% in the year-ago period as a result of continued cleaning activities related to owned brands, as well as higher promotions.
During the third quarter, BBBY faced challenges regarding vendor payment terms and credit line limitations that resulted in lower receipts and lower stock levels, which impacted sales. However, the company has managed to increase its stock level to more than 80%.
BBBY continues to cut costs as part of its turnaround efforts. It remains on track to deliver approx. $250 million in SG&A savings for the second half of FY2022 versus last year. It has started cost reduction approx. $80-100 million, which includes lowering its headcount, and has identified an additional $80-100 million savings opportunities across its supply chain.
Going concern warning
Last week, Bed Bath & Beyond provided a business update stating that based on ongoing losses and negative cash flow, the company will be able to continue as a going concern. He said he is considering all strategic alternatives such as debt restructuring or refinancing, seeking additional debt or venture capital, delaying strategic initiatives, selling assets and other measures, including filing for bankruptcy.
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