Bed Bath & Beyond accused of turning off AC in stores to save money as sales plummet

A new report from Bank of America claims that the company has cut the air conditioner in an attempt to quickly reduce expenses to offset a decline in sales.

Bed Bath & Beyond told CNN that any changes to the store temperature guidelines did not come from companies. “We have been contacted regarding this report, and to be clear, no Bed Bath & Beyond stores were asked to adjust the air conditioner, and there have been no changes to the company’s policy regarding the use of tools,” said a representative. .

Nevertheless, Bank of America analysts who have conducted store visits report growing concerns, including significantly reduced working hours, scaled-down tools, reduced store operating time and canceled remodeling projects. Reward programs have also been reduced and replaced. Analysts expect that the management of Bed Bath & Beyond will soon announce more store closures and stop the opening of their Buy Buy Baby stores.

In the meantime, fire sales and price reductions are underway. The company continues to offer enhanced promotions, including up to a 50% discount on bedding and furniture, free same-day shipping, a $ 10 discount on a $ 30 purchase and a 20% discount on purchases by students and their parents.

But analysts at Riley Securities do not see that these sales campaigns help much. They significantly reduced the price target for the trader’s shares from $ 17 to $ 7, citing a decline in store traffic. A easing of Covid restrictions means lower demand for household goods and supply chain problems have led to a lack of inventory to attract customers, they said. Competitors including Walmart and Target have seen traffic stay steady, analysts noted, while Bed Bath & Beyond drops 20% to 30% year-on-year.

The changes come ahead of the home goods retailer’s report for the first quarter, which will be published this week, and follow a devastating report last quarter when sales fell 22%. Bed Bath & Beyond’s CEO Mark Tritton said the unavailability of certain products caused by supply chains resulted in about $ 175 million in lost sales during the period.

Bank of America analysts believe sales will fall another 20% this quarter.

“The company has underperformed the industry and we believe consensus estimates [of an 18% drop in sales] can be optimistic, “they wrote.

Zacks Equity Research Consensus Estimates for the dealer’s earnings are now associated with a loss of $ 1.28 per share, a decrease of 2660% from last year. Bed Bath & Beyond has an average subsequent four-quarter negative earnings surprise of 4700%, according to the financial analysis firm.

Other disturbing factors for the company include the resignation of two key CFOs in recent months, Chief Accountant John Barresi resigned in May and Heather Plutino, senior vice president of financial planning and analysis and commercial finance, also left the company.

A sale of the spinoff brand Buy Buy Baby also seems less likely, Bank of America analysts said. Activist investor RC Ventures, which owns almost 10% of Bed Bath & Beyond, agreed to sell the brand earlier this year, and buyers expressed interest. However, analysts do not believe that interest can withstand these recent downturns. “We continue to see challenges in completing a deal given BBBY’s deteriorating financial position and increasing high-yield spreads,” they wrote.

Analysts at Riley Securities said they had believed the sale or spin-off of the business could have unlocked $ 1.5 to $ 2 billion in value, but they no longer believe a sale is imminent as the business dries up.

Although the dealer is likely to incur a few blocks of persistent pain, there is still hope, analysts said.

Tritton took over as CEO of the home goods business after he left his job as Target’s chief merchant in November 2019 and quickly launched a massive turnaround plan.

He announced a significant roadmap for closing stores, clearing out the c-suite and directing disposals from companies such as Christmas Tree Shops and Cost Plus World Market. The company said it would spend about $ 250 million on remodeling about 450 Bed Bath & Beyond stores to make in-store shopping easier and more accessible.

“The move is taking longer than expected due to supply chain challenges and into a more challenging retail operating environment,” wrote Riley Securities analysts, but “we believe Bed, Bath & Beyond is heading in the right direction.”