Bed Bath & Beyond Inc. (Nasdaq: BBBY) today reported financial results for the fourth quarter of fiscal 2019 ended February 29, 2020.
“Our fourth quarter performance was consistent with the market update we provided on February 11, 2020,” stated Mark Tritton, Bed Bath & Beyond’s President and CEO. “These results strengthen our resolve to continue to make the necessary, bold and broad-based changes needed to modernize our business, and give us confidence about our ability to improve on this quarterly performance.”
Tritton continued, “We are executing a clear plan to manage our business efficiently and effectively through the coronavirus pandemic, prioritizing the health and safety of our customers and teams. Our financial position and contingency plans will allow us to retain the financial flexibility to make targeted investments that will deepen our connection with our customers and rebuild our authority in the Home space. In this time when Home is even more central to our lives and being safe at home with family is essential, Bed Bath & Beyond takes on an even more important role supporting customers and their families by making it easy to feel at home.
“I want to thank all our associates for their service to the business and to our loyal customers. I am confident we will emerge from this challenge even stronger, given the strength of our brand, our people and our balance sheet.”
Fiscal 2019 Fourth Quarter Results
For the fiscal 2019 fourth quarter, the Company reported a net loss of $(0.53) per diluted share ($(65.4) million), which included several special items such as severance costs, non-cash impairment charges related to certain store level assets and tradenames, and a loss on a sale-leaseback transaction. This compares to a net loss of $(1.92) per diluted share ($(253.8) million) for the fiscal 2018 fourth quarter, which included special items such as a non-cash goodwill and tradename impairment charge. Excluding these special items from both quarters, the Company reported adjusted net earnings of $0.38 per diluted share ($46.9 million) for the fiscal 2019 fourth quarter, and adjusted net earnings of $1.20 per diluted share ($158.8 million) for the fiscal 2018 fourth quarter. Net sales for the fiscal 2019 fourth quarter were $3.1 billion, a decrease of 6.1% compared to the prior year period. Comparable sales in the fiscal 2019 fourth quarter declined 5.6%.
The Company’s fiscal 2019 fourth quarter was favorably impacted by the Cyber Monday holiday week, which occurred during the fourth quarter this year, but occurred in the Company’s third quarter in the prior year period. Adjusting for the calendar shift to exclude Cyber Monday week in both periods, comparable sales for the fiscal 2019 fourth quarter declined 11.0%.
Fiscal 2019 Full Year Results
For the fiscal 2019 full year, the Company reported a net loss of $(4.94) per diluted share ($(613.8) million), which included several special items such as non-cash impairment charges related to goodwill, tradenames, and certain store level assets, severance costs, shareholder activity costs, an incremental charge for markdowns associated with the Company’s inventory reduction initiative, and a loss on a sale-leaseback transaction, compared with a net loss of $(1.02) per diluted share ($(137.2) million) for the fiscal 2018 full year, which included several special items such as non-cash goodwill and tradename impairment charges, severance costs, and a gain on the sale of a building. Excluding these special items from both years, the Company reported adjusted net earnings of $0.46 per diluted share ($57.3 million) for the fiscal 2019 full year, and adjusted net earnings of $1.97 per diluted share ($264.8 million) for the fiscal 2018 full year. Net sales for the fiscal 2019 full year were $11.2 billion, a decrease of 7.2% compared to the prior year period. Comparable sales for the fiscal 2019 full year declined 6.8% compared to the prior year period.
Financial Position Update
During the fiscal 2019 fourth quarter, the Company did not undertake any open market share repurchase activity.
The Company ended fiscal 2019 with approximately $1.4 billion in cash and investments, an increase of approximately 39%, compared with approximately $1.0 billion in cash and investments at the end of fiscal 2018.
Retail inventories of $2.0 billion (at cost) reflected a reduction of approximately 20% or $516 million (at cost), during the fiscal 2019 fourth quarter, compared to the end of the prior year period. Excluding the incremental charge for markdowns associated with the Company’s inventory reduction initiative, adjusted retail inventories of $2.1 billion (at cost) reflected a reduction of approximately 16% or over $400 million (at cost), at the end of the fiscal 2019 fourth quarter, compared to the end of the prior year period.
COVID-19 Response Update
On April 2, 2020, Bed Bath & Beyond extended the temporary closure of all its retail banner stores across the US and Canada, other than buybuy BABY and Harmon Face Values stores, until May 2, 2020. In conjunction with this decision, the Company announced it would implement additional cost reductions, including a furlough of the majority of store associates and a portion of corporate associates until at least May 2, 2020, a temporary reduction in salaries of the Company’s executive team by 30%, and a temporary reduction in the quarterly cash compensation of the independent directors of the Board by 30%.
The Company also modified its previously announced capital allocation plans as a result of the significant uncertainty related to the COVID-19 pandemic. The Company has taken or plans to take the following further actions while managing this period of business disruption:
- Elected to draw down the additional funds ($236 million) remaining from its revolving credit agreement, in an abundance of caution and as a proactive measure;
- Suspended prior plans to spend up to $600 million in fiscal 2020 for share repurchases, future dividends, and debt reduction;
- Postponed approximately $150 million in planned capital expenditures out of fiscal 2020, including some store remodels;
- Reduced discretionary spend such as business travel, advertising and expense associated with the maintenance of stores that are temporarily closed;
- Renegotiating extensions of payment terms for goods and services, and rent;
- Managing to lower inventory levels;
- Implementing applicable benefits of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), such as deferring employer payroll taxes and utilizing the ability to carry back and deduct losses to offset prior income in previously filed tax returns; and
- Prioritizing approximately $250 million in essential capital expenditures to drive strategic growth plans, including investments in digital and Buy Online Pick Up In Store (BOPIS).
Outlook
The Company’s first quarter and full-year 2020 results will be unfavorably impacted by the COVID-19 pandemic. The duration and extent of the pandemic is highly uncertain, and Bed Bath & Beyond’s results could be impacted in ways that are difficult to predict today. Due to the level of market uncertainty, the Company will not provide further financial guidance for fiscal 2020 at this time.
Fiscal 2019 Fourth Quarter Conference Call and Investor Presentation
Bed Bath & Beyond Inc.’s fiscal 2019 fourth quarter conference call with analysts and investors will be held today at 5:00pm ET and may be accessed by dialing 1-888-424-8151, or if international, 1-847-585-4422, using passcode ID number 6105417#. A replay of the call will be available today at 8:00pm ET through 8:00pm ET on Friday, April 17th, and can be accessed by dialing 1-888-843-7419, using passcode ID number 6105417#.
