Tuesday, home goods retailer Bed Bath & Beyond Inc. (BBBY) reported that it is cutting its earnings per share and sales guidance for the third quarter, due to the challenging macroeconomic climate prevailing over almost all industries and negative impact from the liquidation sales of a major competitor.
The Union, New Jersey-based company has lowered its third quarter earnings guidance to be in the range of $0.31 to $0.35 per share from its previous earnings forecast of $0.41 -$0.47 per share.
The company also expects sales growth to decline by about 0.7% from a year ago. Earlier, the company expected sales to grow 3% to 6% for the third quarter.
Analysts polled by First Call/Thomson Financial expect the company to earn $0.40 per share for the quarter on revenue of $1.84 billion. Analysts' estimate typically exclude special items.
The company's comparable store sales for the quarter are estimated to have declined by about 5.6%, compared to previous guidance of a relatively flat to low single digit decline.
The company expects to report its actual results for the third quarter on January 7, 2009.
Steven Temares, chief executive officer of Bed Bath & Beyond said, "The overall macroeconomic climate remains challenging, which, combined with liquidation sales of a major competitor, negatively impacted our fiscal third quarter. We continue to focus on our customers and in doing so, seek to further distance ourselves from our competitors. We also will continue to base our actions on what is prudent under current circumstances and what is in the best long-term interests of our company, our customers and our shareholders."
The increase in fuel and food prices has forced customers to rein in spending, while focusing more on absolute necessities. This has led to a decline in sales at many retailers. With the mortgage crisis, fewer people are changing homes, which mean difficult times for those selling home improvement items.
On November 24, the brokerage firm, Cowen & Co., reiterated Underperform rating on the stock. The brokerage lowered its 2008 earnings per share estimate to $1.73 from $1.79, its 2009 estimate to $1.73 from $2.05, and its 2010 estimate to $2.01 from $2.32.
Cowen analyst Laura Champine believes that the company will eventually gain significant market share since the Linen's 'n Things' bankruptcy is overstated, and believed liquidation sales could cause the company to lose share in the near-term and force price competition.
The analyst suspected overcapacity in the commoditized home furnishings space, with the growing presence of Wal-Mart (WMT), Target (TGT) and other discounters, should prevent Bed Bath & Beyond from gaining significant long-term market share.
For the second quarter, the company reported net income of $119.3 million or $0.46 per share, lower than $147.0 million or $0.55 per share reported in the year-ago quarter. Sales for the second quarter increased 4.9% to $1.85 billion from $1.77 billion in the same quarter last year. Same-store sales for the quarter decreased by about 0.1% over the prior-year quarter.
The company's stock, which has been trading in the range of $16.23-$34.73 for the past year, closed Tuesday's regular trade at $19.67, up from the previous close of $18.30, on a volume of 6.12 million shares. However, the stock lost $0.32 or 1.63%, and traded at $19.35 in the after-hour trade.
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