Bed Bath & Beyond Shares Dive on Sharp Sales Decline

Shares fell around 22% to $17.28 in midday trading Thursday, erasing the year-to-date stock gains.

Net sales for the fiscal second quarter ended Aug. 28 fell 26.2% to $1.98 billion as traffic slowed in August, the company said. Bed Bath & Beyond also lowered its sales and adjusted profit expectations for the year as it anticipates greater supply-chain challenges.

Challenges in the company’s operating environment were evident in key states such as Florida, Texas and California, all of which make up a substantial portion of sales, Mr. Tritton said. He said cost inflation also escalated beyond the significant increases the company had already anticipated, especially later in the quarter.

Bed Bath & Beyond found operating conditions worse than it had prepared for, and the challenges the company faced in August haven’t abated in September, Mr. Tritton said.

“The speed of industry inflation and lead-time pressures outpaced our plans to offset these headwinds and, as a result, we did not pivot fast enough, especially on price and margin recovery,” he said on a conference call.

Mr. Tritton said the company disproportionately reduced the distribution of its printed circulars, which have been a key driver of traffic. “One of the critical missteps” Bed Bath & Beyond had during the quarter was cutting back key traffic drivers that had been traditionally strong, he said, as the company sought to shift customer engagement toward online and social media channels.

Mr. Tritton has been trying to sharpen Bed Bath & Beyond’s marketing to make clear that its prices are competitive. He has been revamping the chain by switching out name-brand goods from in-house brands and clearing the clutter from stores. Those moves can take a while to gain traction, analysts said. The company competes in a crowded space dominated by Amazon.com Inc. and off-price retailers such as T.J. Maxx and HomeGoods, both owned by TJX Cos., that have been perceived as offering better value.

Bed Bath & Beyond posted a net loss of $73.2 million for the quarter, compared with a profit of $217.9 million a year earlier. Adjusted earnings were 4 cents a share, lower than the 52 cents a share analysts polled by FactSet had expected.

The company now expects its fiscal 2021 sales to be between $8.1 billion and $8.3 billion, down from its prior outlook of $8.2 billion to $8.4 billion. It expects adjusted earnings of 70 cents a share to $1.10 a share, compared with its previous expectation of $1.40 a share to $1.55 a share.

Supply-chain disruptions have affected everything from sneakers to artificial Christmas trees. Dollar Tree Inc., for example, said this week that it would start selling products at prices slightly above $1 in some of its stores, expanding earlier tests selling items at higher price points amid supply-chain snarls, a tight labor market and higher inflation costs.

Federal Reserve Chairman Jerome Powell said the central bank sees a current surge in prices due primarily to supply-chain bottlenecks continuing into next year before fading. At the same time, economists expect the recovery from the pandemic to reaccelerate as the coronavirus’s toll eases after the Delta variant appeared to temper economic growth this summer.

—Suzanne Kapner contributed to this article.

Write to Dave Sebastian at [email protected]