Bed Bath & Beyond Adds To Retail Gloom
America's retailing gloom continues.
Hours after Toys ‘R' Us collapsed and went into bankruptcy protection, the retail slump whacked another big US chain - this time in homewares. Bed Bath & Beyond reported sales and profits well below market forecasts and the shares plunged 18% in after hours trading, bounced a little and ended down 12%, taking the fall so far this year to more than 33%.
The company blamed weak demand, a strategy change (always a hardy perennial when a weak result is released) aimed at making it more relevant in these days of all things digital and Amazon, as well as Hurricane Harvey’s impact in southern Texas.
Analysts’ forecasts were well above those outcomes and missed completely, no doubt helping drive the shares down in after hours trading.
The company said earnings were cut by charges impacted with its previously announced plans to “realign” its store-management structure to help overhaul its brick-and-mortar and online stores to compete with digital rivals.
The company also estimated it would take a 2 cents-a share hit from the impact from Hurricane Harvey and its flooding in and around Houston.
The company slashed its earnings for the full year to $US3 a share from its previous forecast of $US4.58 which drove much of the selling.
US analysts point out that Target and Walmart are doing as much damage to this sector as online rivals are - the Amazon factor is not such a big deal - its the aggressive merchandising and marketing efforts of its much bigger rivals.
According to the same analysts, Toys ‘R’ Us was also hit by the rising intensity of competition from the likes of Walmart and Target, with their online and store based offers proving tough to match, especially as Toys ‘r’ Us was slow to go digital (perhaps held back by its big debt and slow moving private equity managers and owners).
A month ago, shares in Foot Locker, the big sporting shoe and goods chain plunged 28% after weak quarterly figures revealed a 6% plunge in same store sales and a 4.4% slump in top line revenues. Also hurting it was the news that some of its biggest suppliers, such as Adidas and Nike were starting to do more direct to consumer selling through the likes of Amazon (and from their own websites), bypassing Foot Locker and other chains.
That is the fear investors have for toy chains - the prospect of Mattel and Hasbro, the two dominant suppliers - selling into the consumer market via third party or their own websites.
For Bed Bath & Beyond new competition of this type is remote - there are no really dominant, high profile well known brands supplying their stores. It’s the bigger rivals such as Walmart and Target and peers like Williams Sonoma that are making like tougher and the growing slide in traffic numbers at US shopping malls where most of its outlets are located.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.