Bed Bath & Beyond Stock is Pricing Right

Home goods retailer Bed Bath Beyond NASDAQ: BBBY stock has collapsed from its meme stock highs of 2021. Supply chain disruptions, logistics and inflation have beaten down this stock its fiscal Q3 2021 earnings and forward guidance. Granted, the Company had planned (-14%) revenue decline related to planned reduction from non-core banner divestitures, it also declined an additional (-14%) of top line in the quarter. The COVID-19 omicron variant is also impacting sales and could further hurt back-to-school sales if it continues to spread into the summer. The bar has been set low moving forward, especially with holiday sales figures due out shortly. Prudent investors seeking exposure in the former meme stock on the cheap can watch for opportunistic pullback levels to scale into a speculative position.

Q3 FY Fiscal 2021 Earnings Release

Bed Bath & Beyond released its third-quarter fiscal 2021 results for the quarter ending November 2021 on January 6th. The Company reported a earnings-per-share (EPS) loss of (-$0.25) excluding non-recurring items versus consensus analyst estimates for a breakeven quarter, a (-$0.25) miss. The Company blamed shortfalls on supply chain constraints. Revenues fell 28.3% year-over-year (YoY) to $1.88 billion, missing consensus analyst estimates for $1.95 billion. Comparable sales fell (-10%) but improved sequentially.

CEO Commentary

Bed Bath & Beyond CEO Mark Tritton commented, “During a quarter where our sales momentum was not where we wanted it to be with sales of $1.9 billion and a 7% comp decline, improved momentum in November and strong gross margins demonstrated progress in our transformation. After our previously announced slower start to sales in September and October, we drove a change in trends by November with our comp decline improving, particularly in stores. However, overall sales were pressured despite customer demand due to the lack of availability with replenishment inventory and supply chain stresses that had an estimated $100 million, or mid-single digit, impact on the quarter and an even higher impact in December. Nevertheless, our customer acquisition strategy for the Bed Bath banner is gaining traction as evidenced by our Beyond+ loyalty program, which grew by nearly half a million members after one of our largest new subscriber quarters. Our Buy Buy BABY banner continues to deliver double-digit growth and we are on track to achieve approximately $1.3 billion in sales in this first year of transformation - ahead of our investor day goals - all while improving profitability and market share." He continued, "In response to a sharp increase in inflation and pervasive freight and supply chain headwinds, we swiftly implemented market-driven pricing, promo optimization and product mix plans. Our decisive actions led to an adjusted gross margin rate significantly exceeding plan and above 2020 and 2019 - a key financial barometer of our three-year transformation strategy. Our Owned Brands also continued to produce higher merchandise margins at increased penetration rates. We now intend to expand the Owned Brands strategy to BABY in 2022 as we look at margin enhancing strategies, given sales results in this business have stabilized as a result of our targeted efforts to improve this banner. We are identifying exciting new opportunities to drive sales and BABY is an important cornerstone of our plans, including our recently announced collaboration with Kroger and our own digital marketplace." He concluded, “"Just as we delivered on gross margin during the quarter, our holistic focus is on improving our top and bottom line results as we continue to transform. While we continue to target sales improvement, we are also focused on SG&A. We are pursuing additional expense optimization measures of approximately $100 million annualized that will explore areas such as store fleet optimization, fixed costs and discretionary savings opportunities. Earlier this quarter we also announced that we expect to complete our $1 billion three-year share repurchase plan by the end of fiscal 2021, two years ahead of schedule, which underscores our ongoing confidence in our turnaround and commitment to our capital allocation framework. Having concluded just the third quarter of our multi-year plan, we will continue to execute our strategic transformation by diagnosing and reforming our legacy business to achieve our goals. As we prepare for 2022, we look forward to operating in a normalized environment with a base of business upon which to grow”

Downside Guidance

Bed Bath & Beyond issued downside guidance for Q4 2021 EPS coming in between $0.00 to $0.15 versus $0.70 consensus analyst estimates. The Company expects revenues to come in between $2.1 billion versus $2.25 billion consensus analyst estimates.

BBBY Opportunistic Pullback Price Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for BBBY stock. The weekly rifle chart attempts a bottom near the $12.44 Fibonacci (fib) level. The weekly rifle chart downtrend is stalling as the 5-period moving average (MA) starts to flatten at $15.15, followed by the 15-period MA at $17.18 nearly overlapping with the weekly 200-period MA. The weekly stochastic has slowed down as it stalls under the 20-band to either coil and cross back up or form a low band mini inverse pup towards the weekly lower Bollinger Bands (BBs) near $7.60. The daily rifle chart bottomed as the stochastic coils through the 20-band with a mini pup. The daily 5-period MA is sloping up at $14.09 attempting to breakout on a crossover through the 15-period MA at $14.52. The daily market structure low (MSL) buy triggered on the breakout through $13.92.  Prudent investors can watch for opportunistic pullback levels at the $14.17 fib, $13.38 fib, $12.44 fib, $11.34 fib, and the $10.44 fib level. Upside trajectories range from the $18.65 fib up towards the $23.37 fib level.