Bed Bath & Beyond (BBBY) earnings Q4 2020

Bed Bath & Beyond reported a double-digit drop in fiscal sales in the fourth quarter on Wednesday, as ongoing closures and divestments as part of a larger recovery plan continue to influence results.

Its shares fell by more than 8% in premarket trading, as some investors expected to find clearer signs of progress.

“There are some positive things, but it’s still moving,” said Jessica Ramirez, a retail research analyst for Jane Hali & Associates. “Knowing the street, they want these changes pretty quickly. So far, investors want things to be in better shape.”

The retailer reaffirmed a previous sales outlook for the next fiscal year, noting that the positive sales momentum was recorded in the current quarter. Many Americans turned to the company’s stores and website during the Covid pandemic to buy cleaning supplies, kitchen appliances, bedding and other items for their homes.

However, first-quarter results will be messy, chief executive Mark Tritton said in an interview. During a year ago, all of Bed Bath & Beyond’s stores were closed due to the health crisis and are relying entirely on its digital business to fuel sales. This is different from some retailers, especially Walmart and Target, which have been able to keep their stores open throughout the pandemic.

“What you see is some turbulence,” Tritton said. “You will see a fork in the retail market.”

Here is how the company did in the quarter ended February 27, compared to what analysts anticipated, using a survey conducted by Refinitiv:

• Earnings per share: 40 cents adjusted compared to 31 cents expected
• Revenue: $ 2.62 billion compared to $ 2.63 billion expected

Bed Bath & Beyond’s net income during this period increased to $ 9.1 million or 8 cents per share, compared to a loss of $ 65.4 million or 53 cents per share a year earlier. Excluding the single adjustments, the company earned 40 cents per share, better than the 31 cents expected by analysts polled by Refinitiv.

Net sales fell about 16 percent to $ 2.62 billion from $ 3.11 billion a year earlier. It was slightly lower than the $ 2.63 billion analysts anticipated.

The company said the year-over-year decline was driven in part by the sale of its Christmas tree stores and companies in the global Cost Plus market, as well as the continued closure of stores.

Sales in the same store increased by 4%, the company said. Online sales rose 86% in the fourth quarter, but that wasn’t enough to fully offset the reported double-digit drop in store traffic. The company mentioned that 41% of online sales were made by stores.

Under the same name Bed Bath & Beyond, it recorded the largest increase in the organization of the house, followed by the preparation of food in the kitchen, interior decoration and then bedding. Sales at the same store under the Bed Bath & Beyond banner increased by 6%.

Bed Bath & Beyond reaffirmed its fiscal sales prospects for 2021, which it gave in January, which calls for sales to be between $ 8 billion and $ 8.2 billion. Analysts estimate sales in 2021 of $ 8.18 billion, according to Refinitiv.

The current quarter will be affected not only by the closure of stores from a year ago, but also by the ongoing restructuring of the company. The four main banners are Bed Bath & Beyond, Buybuy Baby, Harmon Face Values ​​and Decorist.

The retailer estimates that net sales in the first quarter will increase by more than 40% year-on-year. Analysts demanded a jump of 45.8%. However, ruling out the impact of the divested business, Bed Bath & Beyond said sales on the four main banners could increase from 65% to 70%.

Tritton played a crucial role in his previous concert as chief retailer at Target to help the retailer build customer enthusiasm around exclusive brands and refurbished stores. Wall Street is still waiting to see if it can achieve the same success at Bed Bath & Beyond.

As part of Tritton’s change plans, Bed Bath & Beyond is remodeling about 130 to 150 stores this fiscal year, including 26 remodels in the first quarter. It just completed its first batch on the Houston market in February.

The company said it will spend about $ 250 million over the next three years to remodel about 450 Bed Bath & Beyond stores in total. This involves bleaching the aisles and removing high piles of goods often seen on the top shelves, adding fresh signs and installing more modern lighting fixtures.

“These are the first days,” Tritton told CNBC about the remodeling. “Normally, we have an adjustment period as we go through each remodel … it’s a 12-week process.”

Bed Bath & Beyond is also consolidating its list of private labels in various categories of household items. It plans to launch at least eight brands this year, hoping the exclusivity will be enough to drive people to its stores over the competition, which includes Amazon.

Last month, she debuted on Nestwell, which sells bed and bath items. Haven, a spa-inspired bath brand, will be launched next week.

Bed Bath & Beyond said it expects its private-label sales to grow to 30% of its business within three years, up from about 10% starting today. The company said that these efforts should also contribute to increasing its profitability.

As the year progresses, Bed Bath & Beyond said it expects a sequential improvement in profit margins. His hope is that the pressures caused by high transport costs, which have affected many retailers during the pandemic, will diminish.

“In 2020, our digital combination with stores has been oversized,” said Tritton. “A digital sale, because of shipping costs, is always a little different. We will see recalibration in 2021.”

This year, the company plans to buy back $ 325 million of its own shares, up from $ 300 million last year. The three-year repurchase authorization was increased to $ 1 billion from $ 825 million.

Shares of Bed Bath & Beyond have risen about 57% so far since Tuesday’s market close. The company has a market capacity of $ 3.4 billion.

Find here the complete press release of Bed Bath & Beyond’s income.

—CNBC Courtney Reagan contributed to this reporting.