Bed Bath & Beyond Reports Fiscal 2022 Third Quarter Results
Union, NJ — Bed Bath & Beyond Inc. reported financial results for the third quarter of fiscal 2022 ended November 26, 2022.
Sue Gove, President & CEO of Bed Bath & Beyond Inc. said, “At the beginning of the third quarter, we initiated a turnaround plan anchored on serving our loyal customers, following a period when our merchandise and strategy had veered away from their preferences. Although we moved quickly and effectively to change the assortment and other merchandising and marketing strategies, inventory was constrained and we did not achieve our goals. We will continue to rebalance our assortment towards National Brands and refine our Owned Brands mix to reflect the deep understanding of our customer, along with the selection and value only we can offer in the Home and Baby markets. We are actively pursuing higher in-stock levels to meet proven demand.”
Ms. Gove continued, “We are implementing our plan expeditiously while managing our financial position in a changing landscape. We are delivering on our aggressive second half commitment of $250 million in SG&A optimization, or $500 million in annualized savings. We are also on track to achieve the 150 store closures that we previously outlined, which will further enable us to allocate resources according to customer demand. Our organization is more streamlined and we have adopted a more focused infrastructure that reflects our current business.”
“For decades, Bed Bath & Beyond has set the pace across the sector and we have commanded our position in retail through many different economic cycles and alongside a continuously evolving customer. We believe our concrete advantages in defining categories, offering broad and curated selections, and delivering for customers are compelling reasons why we will continue to command a formidable presence in the Home and Baby categories into the future.”
“As we shared last week, we continue to work with advisors as we consider all strategic alternatives to accomplish our near- and long-term goals. We have a team, internally and externally, with proven experience helping companies successfully navigate complex situations and become stronger. Multiple paths are being explored and we are determining our next steps thoroughly, and in a timely manner. We are committed to updating all stakeholders on our plans as they develop and finalize – particularly our employees and partners, who are the essential catalysts of our business and the cornerstones of our future.”
Ms. Gove concluded, “We want our customers to know that we hear them and are charging ahead every day to meet their needs. Our entire organization is laser-focused on maximizing the value of our company by reconnecting with our customers and positioning Bed Bath & Beyond, buybuy BABY, and Harmon for long-term success.”
Q3 Highlights
- Net Sales of $1.259 billion declined (33)%, predominantly driven by a Comparable1 Sales decline of (32)%
- Bed Bath & Beyond banner Comparable1 Sales decline of (34)%; buybuy BABY Comparable1 Sales decline in the low-twenties percent range
- Sales performance driven by lower in-stock position of approximately 70% and decrease in customer traffic
- Welcome Rewards membership surpasses 16 million, increasing from approximately 6 million in the second quarter of fiscal 2022, reflecting predominantly new members
- GAAP Gross Margin of 22.1%; Adjusted2 Gross Margin of 22.8% reflecting the continuation of incremental clearance activity related to discontinued Owned Brands merchandise and increased promotional activity
- Double-digit decrease in Owned Brands inventory penetration versus peak levels during the first half of fiscal 2022
- SG&A Expense of $583.6 million significantly below $698.0 million last year, driven by successful execution of aggressive cost reduction initiatives to right-size expense structure as previously committed
- On track to deliver approximately $250 million of SG&A savings versus last year for the second half of fiscal 2022, or $500 million on an annualized basis
- On track to complete approximately 150 store closures by the end of fiscal 2022
- Initiated incremental cost reductions of approximately $80 million to $100 million across corporate, including overhead expense and headcount, to align with current business
- Additional $80 million to $100 million savings opportunity identified across supply chain that will also improve cost to serve and time to deliver for our customers
- Net Loss for the quarter included $100.7 million of non-cash impairment charges related to certain store-level assets
- Cash Flow from Operations of approximately $(307.6) million, Liquidity of approximately $0.5 billion, including the Company’s ABL facility and FILO loan less borrowings of $550.0 million
Fiscal 2022 Third Quarter Results (ending November 26, 2022)
Net sales of $1.259 billion declined (33)%, reflecting a Comparable1 Sales decline of (32)%.
- By channel, Comparable1 Sales declined (31)% in Stores and (33)% in Digital versus the fiscal 2021 third quarter.
- By banner, Comparable1 Sales decreased (34)% at Bed Bath & Beyond and declined in the low-twenties at BABY compared to the prior year period.
GAAP Gross Margin of 22.1% and Adjusted2 Gross Margin of 22.8% included the negative impact of Owned Brands clearance activity related to the rebalancing of the Company’s merchandise assortment towards National Brands, as well as incremental promotional activity.
SG&A Expense remain at lower levels compared to the prior year period, primarily due to the implementation of cost optimization plans to align with business performance. The Company expects to deliver its previously announced SG&A Expense reduction target of approximately $250.0 million versus last year for the second half of fiscal 2022, or approximately $500 million on an annualized basis.
Adjusted2 EBITDA for the period was ($225.0) million reflecting lower Net Sales and lower Adjusted2 Gross Margin.
Net Loss per diluted share of $(4.33) for the quarter reflected $0.68 of special items for the quarter including $100.7 million of non-cash impairment charges primarily related to certain store-level assets. Excluding special items, Adjusted2 Net Loss per diluted share was $(3.65).
For the fiscal 2022 third quarter, the Company reported operating cash flow of approximately $(307.6) million.
Cash, cash equivalents, restricted cash and investments totaled approximately $0.2 billion and Total Liquidity3 was approximately $0.5 billion as of the fiscal 2022 third quarter, including the Company’s $1.130 billion asset-backed revolving credit facility and FILO facility less borrowings of $550.0 million and approximately $186.2 million in letters of credit.
Fiscal 2022 Third Quarter Conference Call
Bed Bath & Beyond Inc.’s fiscal 2022 third quarter conference call will be held today at 8:15am EDT and may be accessed by dialing 1-404-400-0571, or if international, 1-866-374-5140, using conference ID number 32641301#. An audio webcast of the conference call, along with the earnings press release and supplemental financial disclosures, will also be available on the investor relations section of the Company’s website at http://bedbathandbeyond.gcs-web.com/investor-relations. The webcast will be available for replay after the call.
(1) Comparable Sales reflects the year-over-year change in sales from the Company’s retail channels, including stores and digital, that have been operating for twelve full months following the opening period (typically six to eight weeks). Comparable Sales excludes the impact of the Company’s store network optimization program.
(2) Adjusted items refer to comparable sales as well as financial measures that are derived from measures calculated in accordance with GAAP, which have been adjusted to exclude certain items. Adjusted Gross Margin, Adjusted SG&A, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EPS – Diluted are non-GAAP financial measures. For more information about non-GAAP financial measures, see “Non-GAAP Information” below.
(3) Total Liquidity includes cash & investments and availability under the Company’s asset-based revolving credit facility.
| BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Operations (in thousands, except per share data) (unaudited) |
|||||||
| Three Months Ended | Nine Months Ended | ||||||
| November 26, 2022 |
November 27, 2021 |
November 26, 2022 |
November 27, 2021 |
||||
| Net sales | $ 1,259,112 | $ 1,877,874 | $ 4,159,548 | $ 5,816,382 | |||
| Cost of sales | 980,249 | 1,208,954 | 3,133,111 | 3,912,699 | |||
| Gross profit | 278,863 | 668,920 | 1,026,437 | 1,903,683 | |||
| Selling, general and administrative expenses | 583,588 | 697,953 | 1,855,973 | 2,009,687 | |||
| Impairments | 100,724 | 1,759 | 182,941 | 18,472 | |||
| Restructuring and transformation initiative expenses | 45,484 | 41,219 | 123,816 | 99,400 | |||
| Loss on sale of businesses | — | 14,100 | — | 18,221 | |||
| Operating loss | (450,933) | (86,111) | (1,136,293) | (242,097) | |||
| Interest expense, net | 33,527 | 15,772 | 68,578 | 47,893 | |||
| (Gain) loss on extinguishment of debt | (94,380) | — | (94,380) | 376 | |||
| Loss before provision for income taxes | (390,080) | (101,883) | (1,110,491) | (290,366) | |||
| Provision for income taxes | 2,886 | 174,546 | 6,300 | 110,152 | |||
| Net loss | $ (392,966) | $ (276,429) | $ (1,116,791) | $ (400,518) | |||
| Net loss per share – Basic | $ (4.33) | $ (2.78) | $ (13.40) | $ (3.90) | |||
| Net loss per share – Diluted | $ (4.33) | $ (2.78) | $ (13.40) | $ (3.90) | |||
| Weighted average shares outstanding – Basic | 90,708 | 99,591 | 83,342 | 102,772 | |||
| Weighted average shares outstanding – Diluted | 90,708 | 99,591 | 83,342 | 102,772 | |||
Non-GAAP Financial Measures
The following table reconciles non-GAAP financial measures presented in this press release or that may be presented on the Company’s third quarter conference call with analysts and investors. The Company believes that these non-GAAP financial measures provide management, analysts, investors and other users of the Company’s financial information with meaningful supplemental information regarding the performance of the Company’s business. These non-GAAP financial measures should not be considered superior to, but in addition to other financial measures prepared by the Company in accordance with GAAP, including comparisons of year-to-year results. The Company’s method of determining these non-GAAP financial measures may be different from other companies’ methods and, therefore, may not be comparable to those used by other companies. As such, the Company does not recommend the sole use of these non-GAAP measure to assess its financial and earnings performance. For reasons noted above, the Company is presenting certain non-GAAP financial measures for its fiscal 2022 third quarter. In order for investors to be able to more readily compare the Company’s performance across periods, the Company has included comparable reconciliations for the 2021 period in the reconciliation tables below. The Company is not providing a reconciliation of its guidance with respect to Adjusted EBITDA and Adjusted SG&A because the Company is unable to provide this reconciliation without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence, the financial impact, and the periods in which the adjustments may be recognized. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
| Non-GAAP Reconciliation
(in thousands, except per share data) (unaudited) |
||||||||||||||||
| Three Months Ended November 26, 2022 | ||||||||||||||||
| Excluding | ||||||||||||||||
| Reported | Loss on Sale of Businesses |
Gain on extinguishment of debt |
Restructuring and Transformation Expenses |
Impairments charges |
Total income tax impact |
Total Impact |
Adjusted | |||||||||
| Gross Profit | $ 278,863 | $ — | $ — | $ 8,558 | $ — | $ — | $ 8,558 | $ 287,421 | ||||||||
| Gross margin | 22.1 % | — % | — % | 0.7 % | — % | — % | 0.7 % | 22.8 % | ||||||||
| Restructuring and transformation initiative expenses | 45,484 | — | — | (45,484) | — | — | (45,484) | — | ||||||||
| (Loss) earnings before provision (benefit) for income taxes | (390,080) | — | (94,380) | 54,042 | 100,724 | — | 60,386 | (329,694) | ||||||||
| Provision for income taxes | 2,886 | — | — | — | — | (1,352) | (1,352) | 1,534 | ||||||||
| Effective tax rate | (0.7) % | 0.2 % | 0.2 % | (0.5) % | ||||||||||||
| Net (loss) income | $ (392,966) | $ — | $ (94,380) | $ 54,042 | $ 100,724 | $ 1,352 | $ 61,738 | $ (331,228) | ||||||||
| Net loss per share – Diluted | $ (4.33) | $ (3.65) | ||||||||||||||
| Weighted average shares outstanding- Basic | 90,708 | 90,708 | ||||||||||||||
| Weighted average shares outstanding- Diluted | 90,708 | (1) | 90,708 | |||||||||||||
| Reconciliation of Net Income (loss) to EBITDA and Adjusted EBITDA | ||||||||||||||||
| Net (loss) income | $ (392,966) | $ — | $ (94,380) | $ 54,042 | $ 100,724 | $ 1,352 | $ 61,738 | $ (331,228) | ||||||||
| Depreciation and amortization | 88,925 | — | — | (17,747) | — | — | (17,747) | 71,178 | ||||||||
| Gain on extinguishment of debt | (94,380) | — | 94,380 | — | — | — | 94,380 | — | ||||||||
| Interest expense | 33,527 | — | — | — | — | — | — | 33,527 | ||||||||
| Provision for income taxes | 2,886 | — | — | — | — | (1,352) | (1,352) | 1,534 | ||||||||
| EBITDA | $ (362,008) | $ — | $ — | $ 36,295 | $ 100,724 | $ — | $ 137,019 | $ (224,989) | ||||||||
| EBITDA as % of net sales | (17.9) % | |||||||||||||||
| (1) If a company is in a net loss position, then for earnings per share purposes, diluted weighted average shares outstanding are equivalent to basic weighted average shares outstanding. | ||||||||||||||||
| Three Months Ended November 27, 2021 | ||||||||||||||||
| Excluding | ||||||||||||||||
| Reported | Loss on Sale of Businesses |
Gain on extinguishment of debt |
Restructuring and Transformation Expenses |
Impairment charges |
Total income tax impact |
Total Impact |
Adjusted | |||||||||
| Gross Profit | $ 668,920 | $ — | $ — | $ 6,111 | $ — | $ — | $ 6,111 | $ 675,031 | ||||||||
| Gross margin | 35.6 % | — % | — % | 0.3 % | — % | — % | 0.3 % | 35.9 % | ||||||||
| Restructuring and transformation initiative expenses | 41,219 | — | — | (41,219) | — | — | (41,219) | — | ||||||||
| (Loss) earnings before (benefit) provision for income taxes | (101,883) | 14,100 | — | 47,330 | 1,759 | — | 63,189 | (38,694) | ||||||||
| (Benefit) provision for income taxes | 174,546 | — | — | — | — | (188,674) | (188,674) | (14,128) | ||||||||
| Effective tax rate | (171.3) % | 207.8 % | 207.8 % | 36.5 % | ||||||||||||
| Net (loss) income | $ (276,429) | $ 14,100 | $ — | $ 47,330 | $ 1,759 | $ 188,674 | $ 251,863 | $ (24,566) | ||||||||
| Net loss per share – Diluted | $ (2.78) | $ (0.25) | ||||||||||||||
| Weighted average shares outstanding- Basic | 99,591 | 99,591 | ||||||||||||||
| Weighted average shares outstanding- Diluted | 99,591 | (1) | 99,591 | |||||||||||||
| Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA | ||||||||||||||||
| Net (loss) income | $ (276,429) | $ 14,100 | $ — | $ 47,330 | $ 1,759 | $ 188,674 | $ 251,863 | $ (24,566) | ||||||||
| Depreciation and amortization | 76,352 | — | — | (12,792) | — | — | (12,792) | 63,560 | ||||||||
| Gain on extinguishment of debt | — | — | — | — | — | — | — | — | ||||||||
| Interest expense | 15,772 | — | — | — | — | — | — | 15,772 | ||||||||
| (Benefit) provision for income taxes | 174,546 | — | — | — | — | (188,674) | (188,674) | (14,128) | ||||||||
| EBITDA | $ (9,759) | $ 14,100 | $ — | $ 34,538 | $ 1,759 | $ — | $ 50,397 | $ 40,638 | ||||||||
| EBITDA as % of net sales | 2.2 % | |||||||||||||||
| (1) If a company is in a net loss position, then for earnings per share purposes, diluted weighted average shares outstanding are equivalent to basic weighted average shares outstanding. | ||||||||||||||||
| BED BATH & BEYOND INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (in thousands, except per share data) |
|||||
| November 26, 2022 |
February 26, 2022 |
November 27, 2021 |
|||
| (unaudited) | (unaudited) | ||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ 153,521 | $ 439,496 | $ 509,054 | ||
| Merchandise inventories | 1,436,150 | 1,725,410 | 1,911,859 | ||
| Prepaid expenses and other current assets | 288,503 | 198,248 | 526,540 | ||
| Total current assets | 1,878,174 | 2,363,154 | 2,947,453 | ||
| Long-term investment securities | 21,451 | 19,212 | 19,237 | ||
| Property and equipment, net | 1,050,526 | 1,027,387 | 923,977 | ||
| Operating lease assets | 1,321,665 | 1,562,857 | 1,603,536 | ||
| Other assets | 129,610 | 157,962 | 162,435 | ||
| Total assets | $ 4,401,426 | $ 5,130,572 | $ 5,656,638 | ||
| Liabilities and Shareholders’ (Deficit) Equity | |||||
| Current liabilities: | |||||
| Accounts payable | $ 697,889 | $ 872,445 | $ 908,070 | ||
| Accrued expenses and other current liabilities | 356,482 | 529,371 | 649,204 | ||
| Merchandise credit and gift card liabilities | 295,197 | 326,465 | 313,968 | ||
| Current operating lease liabilities | 313,368 | 346,506 | 347,721 | ||
| Total current liabilities | 1,662,936 | 2,074,787 | 2,218,963 | ||
| Other liabilities | 119,907 | 102,438 | 69,972 | ||
| Operating lease liabilities | 1,388,484 | 1,508,002 | 1,532,873 | ||
| Income taxes payable | 93,386 | 91,424 | 101,535 | ||
| Long-term debt | 1,935,356 | 1,179,776 | 1,179,682 | ||
| Total liabilities | 5,200,069 | 4,956,427 | 5,103,025 | ||
| Shareholders’ (deficit) equity: | |||||
| Preferred stock – $0.01 par value; authorized – 1,000 shares; no shares issued or outstanding | — | — | — | ||
| Common stock – $0.01 par value; authorized – 900,000 shares; issued 382,339, 344,146 and 344,140, respectively; outstanding 117,322, 81,979 and 96,338 shares, respectively | 3,823 | 3,441 | 3,441 | ||
| Additional paid-in capital | 2,427,739 | 2,235,894 | 2,227,469 | ||
| Retained earnings | 8,549,536 | 9,666,091 | 9,825,156 | ||
| Treasury (TSRMF) stock, at cost; 265,017, 262,167 and 247,802 shares, respectively | (11,731,194) | (11,685,267) | (11,454,757) | ||
| Accumulated other comprehensive loss | (48,547) | (46,014) | (47,696) | ||
| Total shareholders’ (deficit) equity | (798,643) | 174,145 | 553,613 | ||
| Total liabilities and shareholders’ (deficit) equity | $ 4,401,426 | $ 5,130,572 | $ 5,656,638 | ||
| BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (in thousands, unaudited) |
|||||||
| Three Months Ended | Nine Months Ended | ||||||
| November 26, 2022 |
November 27, 2021 |
November 26, 2022 |
November 27, 2021 |
||||
| Cash Flows from Operating Activities: | |||||||
| Net loss | $ (392,966) | $ (276,429) | $ (1,116,791) | $ (400,518) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and amortization | 88,925 | 76,352 | 231,019 | 214,742 | |||
| Impairments | 100,724 | 1,759 | 182,941 | 18,472 | |||
| Stock-based compensation | 2,312 | 8,882 | 18,746 | 26,875 | |||
| Deferred income taxes | — | 175,375 | — | 126,437 | |||
| Loss on sale of businesses | — | 14,100 | — | 18,221 | |||
| (Gain) loss on debt extinguishment | (94,380) | — | (94,380) | 376 | |||
| Other | 2,544 | (2,143) | 3,511 | (7,516) | |||
| Decrease (increase) in assets: | |||||||
| Merchandise inventories | 138,255 | (322,818) | 284,984 | (240,522) | |||
| Other current assets | (34,923) | (21,621) | (34,512) | 60,582 | |||
| Other assets | 6,141 | 143 | 6,059 | (82) | |||
| (Decrease) increase in liabilities: | |||||||
| Accounts payable | (47,391) | (81,898) | (128,792) | (72,408) | |||
| Accrued expenses and other current liabilities | (19,183) | 137,045 | (156,075) | 20,385 | |||
| Merchandise credit and gift card liabilities | (32,651) | 3,094 | (30,724) | 1,551 | |||
| Income taxes payable | 1,507 | (670) | 2,300 | (1,160) | |||
| Operating lease assets and liabilities, net | (24,898) | (14,963) | (52,657) | (16,707) | |||
| Other liabilities | (1,604) | (6,986) | (5,642) | (13,468) | |||
| Net cash used in operating activities | (307,588) | (310,778) | (890,013) | (264,740) | |||
| Cash Flows from Investing Activities: | |||||||
| Purchases of held-to-maturity investment securities | — | — | — | (29,997) | |||
| Redemption of held-to-maturity investment securities | — | 30,000 | — | 30,000 | |||
| Net proceeds from sale of property | — | — | — | 5,000 | |||
| Capital expenditures | (95,594) | (82,995) | (322,094) | (232,470) | |||
| Net cash used in investing activities | (95,594) | (52,995) | (322,094) | (227,467) | |||
| Cash Flows from Financing Activities: | |||||||
| Borrowing of long-term debt | 375,000 | — | 925,000 | — | |||
| Repayments of long-term debt | — | — | — | (11,355) | |||
| Repayments of finance leases | (1,040) | — | (1,849) | — | |||
| Repurchase of common stock, including fees | (2,680) | (118,912) | (45,927) | (358,923) | |||
| Issuance of common stock and At-the-Market offering, net of offering costs | 118,975 | — | 118,975 | — | |||
| Payment of dividends | (13) | (127) | (329) | (767) | |||
| Payment of Exchange Offer costs | (7,992) | — | (7,992) | — | |||
| Payment of deferred financing fees | (19,479) | — | (19,479) | (3,443) | |||
| Net cash provided by (used in) financing activities | 462,771 | (119,039) | 968,399 | (374,488) | |||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (646) | (1,577) | (1,517) | (88) | |||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 58,943 | (484,389) | (245,225) | (866,783) | |||
| Cash, cash equivalents and restricted cash: | |||||||
| Beginning of period | 166,716 | 1,024,830 | 470,884 | 1,407,224 | |||
| End of period | $ 225,659 | $ 540,441 | $ 225,659 | $ 540,441 | |||
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