Bed Bath & Beyond (BBBY) Fourth quarter 2020 earnings

Bed Bath & Beyond reported a double-digit decline in fourth-quarter sales on Wednesday as ongoing store closings and divestments as part of a larger turnaround plan continue to weigh on results.

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

“There are some positives, but it’s still in flux,” said Jessica Ramirez, retail research analyst at Jane Hali & Associates. “Knowing the street, they want these reversals pretty quickly. By then, investors want things to be a little bit okay.”

The big-box retailer confirmed its previous sales outlook for the coming fiscal year and noted that the positive sales momentum has continued into the current quarter. Many Americans turned to the company’s stores and website during the Covid pandemic to purchase cleaning supplies, kitchen appliances, bedding, and other items for their home.

However, the first quarter results will get messy, Chief Executive Mark Tritton explained in an interview. During the same period a year ago, all of Bed Bath & Beyond’s stores were closed due to the health crisis and relied entirely on its digital activities to boost sales. That’s in contrast to some retailers, particularly Walmart and Target, who were able to keep their stores open during the pandemic.

“You see some turbulence in numbers,” Tritton said. ‘You’re going to see a split in the retail market.’

Here’s how the company fared during the quarter ended Feb. 27, compared to what analysts expected, using a survey from Refinitiv:

• Earnings per share: 40 cents adjusted versus 31 cents expected
• Revenue: $ 2.62 billion vs. $ 2.63 billion expected

Bed Bath & Beyond’s net income grew to $ 9.1 million, or 8 cents a share, over the period, compared to a loss of $ 65.4 million, or 53 cents a share a year earlier. Excluding one-off adjustments, the company earned 40 cents per share, better than the 31 cents that analysts expected, surveyed by Refinitiv.

Net sales fell approximately 16% to $ 2.62 billion, from $ 3.11 billion a year earlier. That was slightly less than the $ 2.63 billion that analysts had expected.

The company said the year-over-year decline was driven in part by the sale of its Christmas Tree Shops and Cost Plus World Market businesses, as well as ongoing store closings.

Sales in the same store were up 4%, the company said. Online sales were up 86% in the fourth quarter, but that was not enough to fully offset the reported double-digit declines in retail traffic. The company noted that 41% of online sales were made by retailers.

Within the eponymous Bed Bath & Beyond business, it saw the most growth in the home organization, followed by food preparation in the kitchen, indoor decor, and then bedding. Sales in the same store at Bed Bath & Beyond increased 6%.

Bed Bath & Beyond reaffirmed its fiscal year 2021 sales forecast it had given in January, stating sales should be between $ 8 billion and $ 8.2 billion. Analysts estimate sales in 2021 at $ 8.18 billion, according to Refinitiv.

The current quarter will be affected not only by store closings in the same period last year, but also by the ongoing restructuring of the company. The four core banners are Bed Bath & Beyond, Buybuy Baby, Harmon Face Values, and Decorist.

The retailer expects net sales to increase by more than 40% year over year in the first quarter. Analysts asked for a 45.8% jump. However, disregarding the impact of divestments, Bed Bath & Beyond said the sales of the four major banners could grow by 65% ​​to 70%.

Tritton played a pivotal role in his previous appearance as head merchant at Target, helping the big-box retailer build excitement among customers around exclusive brands and refurbished stores. Wall Street is still waiting to see if he can achieve the same success at Bed Bath & Beyond.

As part of Tritton’s turnaround plans, Bed Bath & Beyond is in the process of renovating approximately 130 to 150 stores this fiscal year, including 26 renovations during the first quarter. It just completed its first batch in the Houston market in February.

The company said it will spend approximately $ 250 million over the next three years to renovate a total of approximately 450 Bed Bath & Beyond stores. That includes clearing aisles and removing towering piles of merchandise often seen on top shelves, adding new signage, and installing more modern lighting fixtures.

“It’s an early day,” Tritton told CNBC of the renovations. “Normally we have an adjustment period with every remodel … it takes about 12 weeks.”

Bed Bath & Beyond is also strengthening its private label selection for different categories of household goods. It plans to launch at least eight brands this year, in the hope that the exclusivity will be enough to drive people to the stores above the competition, including Amazon.

Last month, the Nestwell debuted, which sells bed and bath items. Haven, a spa-inspired bath brand, is launching next week.

Bed Bath & Beyond has said it expects sales of its private label products to grow to 30% of its business within three years, from around 10% as of today. The company said these efforts should also help drive profitability.

As the year progresses, Bed Bath & Beyond said it expects a sequential improvement in profit margins. She hopes that the pressure of increased freight costs that hit many retailers during the pandemic will ease.

“In 2020, our mix from digital to stores was too great,” said Tritton. “A digital sale is always a bit different, because of the shipping costs. We will see that recalibration in 2021.”

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

Bed Bath & Beyond shares are up about 57% since Tuesday’s close. The company has a market capitalization of $ 3.4 billion.

Find the full press release about the income of Bed Bath & Beyond here.

—CNBCs Courtney Reagan contributed to this report.