Bed Bath & Beyond's outlook sends stock plunging

(AP) NEW YORK - Bed Bath & Beyond's (BBBY) shares tumbled a day after the home goods seller forecast weaker earnings than Wall Street expected as concern spread about the company's health in view of the wobbling economy.

The chain gave the disappointing outlook even as it announced better-than-expected first-quarter results. It told investors it was being forced to use more coupons to get people to shop, and that was hurting its profitability.

Bed Bath & Beyond Inc. also faces growing competition from discounters and online, where it has made only a limited foray. Canaccord Genuity retail analyst Laura Champine said in April that the retailer's market share had fallen during the fourth quarter for the first time this decade. And she estimated the company was generating less than 2 percent of its sales online.

Meanwhile, Bed Bath & Beyond also is coping with expenses from recent acquisitions.

In May, it announced it is acquiring competitor Cost Plus Inc. Cost Plus, which is based in , based in Oakland, Calif., sells home furnishings, accessories, food and wine through World Market and Cost Plus World Market stores. Bed Bath & Beyond already runs more than 1,000 stores under its own name and the Christmas Tree Shops, buybuy Baby, Harmon and Home & More banners. This month, Bed Bath & Beyond said it is buying textile seller Linen Holdings LLC.

A slowing economy could stymie the company's efforts to generate more traffic and compete against online merchants. Recent reports on hiring and first-time applications for unemployment benefits indicate layoffs are continuing and hiring is not increasing. And the National Association of Realtors said Thursday that sales of previously occupied homes dropped 1.5 percent in May from April.

"Bed Bath & Beyond has had a great run. But the question is whether the great growth pace is now running out of gas," said Craig Johnson, president of Customer Growth Partners, a retail consultancy. "Where does it go at a time when consumer demand is beginning to soften?"

He said the company is particularly vulnerable as retailing shifts to the Internet.

"Bed Bath & Beyond has always been bricks-centric," Johnson said.

Overall, online sales rose twice as fast last year as sales did in physical stores, according to government statistics.

Johnson also said Walmart stores could pull sales from Bed Bath & Beyond.

The Union, N.J.-based retailer did report better earnings than analysts expected for the quarter that ended May 26: $206.8 million, or 89 cents per share, compared with an average forecast from analysts for 84 cents per share, according to FactSet. But its revenue of $2.22 billion, up 5 percent from a year earlier, fell below Wall Street predictions of $2.24 billion.

The modest 3 percent increase in revenue at stores open at least a year was a sharp slowdown from the fourth quarter, when the figure rose 6.8 percent. The comparison is an important measure of retailers' fiscal health because it isn't skewed by recently store openings and closings.

For the current quarter, Bed Bath & Beyond expects to earn 97 cents to $1.03 per share, while analysts were looking for $1.08 per share.

CEO Steven Temares told investors during a conference call that the economy won't affect Bed Bath & Beyond's fundamental strategy of offering low prices and good customer service.

"As always, we will continue to invest in all aspects of our company and work to enhance our customer's overall experience in store, online and through mobile devices and social media," Temares said Wednesday.

The shares fell $12.50 Thursday, almost 17 percent, and closed at $61.17, making Bed Bath and Beyond the biggest decliner in the Standard & Poor's 500 Index.

The shares have been trading between $48.75 and $75.84 over the past year, though they fell as low as $17 in late 2008.

[55minus5]

I couldn't finish reading this article. Whatever.
The coupons I receive in the mail go straight to the garbage, anyway.

[hypnotoad72]

Many of their products are grossly overpriced to begin with. The $30 lamp that had cost maybe $1 to build and, while having a neat design, did not cost them $15 to scribble out the blueprint for it.

[mari1963]

Keep the coupons! Lower the prices and stop discontinuing products/fragrances that customers like! It's dumb!

[jgnv]

Let's be honest. If the average American household is cutting back on expenses, does it really make any sense to purchase items from a specialty retail outlet such as BB&B? No, it does not.

[hypnotoad72]

jgnv -

Well, then BB&B, Apple, and others will be sinking along with everyone else.

Guess who will get bailed out though, with the petty excuses trying to feebly claim why... that's right, the same supply-side that's spat on the demand-side all this time... while taking subsidy, handouts, and bailouts from it as well.

[saneObserver]

It seems like brick and mortar retailers are sort of caught in the middle. They have to compete so hard with the online retailors that they thrift the crap out of their stores and therefire remove the service benfit that should distinguish a brick and mortar store. Remeber wehn stores had people to help you find something. remeber knowledgeable sales people. You'd think with high margins on Chinese junk they'd be able to pay people to sell it. Maybe their greed for higher margins through so many Americans out of work that no one can afford to buy anything.

[hypnotoad72]

And then blame Obama for it, since he's easier to blame everything on...

[TheprofromDover]

Get rid of the couponing and specials. Great Idea! Just ask JC Penny how they are doing with that.

The real problem is the culture---and it begins at the head---bad service (underpaid sales clerks) and merchandise that tends to be not the best quality (and much is imported from China). The managers and marketing of this corporation are failing, that is why this business is failing.

[hypnotoad72]

I don't disagree.

Not just underpaid, but under-informed, and over-told to meet quotas for credit card sales and other things and the first let to go if they don't comply with their masters' demand to meet that quota. Then people wonder why credit card usage is through the roof... (I think, in ways, some people would gripe either way...)

Marketing is failing, but when people have less money to spend, people won't spend and that hurts businesses as well. "Supply-side" economics acts as if workers get their money off of trees. Half of the system has ignored the other, and then demands bailouts on top of subsidy because it is not an ethical system.

[mentalist65]

Practically everything they sell is from China. If they sold USA made goods, I would buy from them.

[hypnotoad72]

But some will say "Will you want to pay 40% more?"

In which case, answer "How is that relevant; companies absconded this country to boost inflated 'profit' to themselves. They caused the mess, don't make it sound like we're supposed to pick up the tab" (despite our already doing so by our taxes being given out as subsidy, handouts, and bailouts... and anyone calling our system 'free market' is a liar.)

[mentalist65]

Practically everything they sell is from China. If they sold USA made goods, I would buy from them.

[makemyday2day]

And Wal-Mart doesn't sell garbage from China?? I'll bet you and your cronies spend hours shopping 'Wally World' and then complain about every other store that sells the Chinese garbage. Where do you shop that only sells USA-made goods - and affordable to the average person??

[Cubetap]

Tough S%^# for B-B-B. Last time I went there there was no one willing to advise location of products. Employees all had a scowl on their face. And why do they carry electronics--it is BED, BATH & BEYOND (to electronics, I guess).

[bobnjersey]

[It told investors it was being forced to use more coupons to get people to shop, and that was hurting its profitability.]
----------------------------------------------
so ... the coupons are the thing that bring the people to the stores and buy stuff ... but the coupons are the problem?

now that the stock is down 17% in one day ... a nice discount ... all those that buy the stock at this lower price will no doubt also be a problem, right?

[ssporleder]

Their prices are higher, however, than the Target down the street.