Home-goods retailer Bed Bath & Beyond plans to make an additional $80-$100 million more in cost reductions, including taking the knife again to expense and headcount, according to CEO Sue Gove, the sole speaker on the company’s Tuesday earnings call with analysts.
The Union, N.J.-based company, which warned last week it was considering all strategic options including bankruptcy, issued its fiscal third-quarter earnings report for the period ended Nov. 26 which reflected another difficult period in which it faced woes on a number of fronts, resulting in sales that fell 33% to $1.3 billion from the year-earlier period and a net loss that widened to $392.96 million year-over-year from $276.4 million.
“They’re burning cash and there’s not a whole lot of capital to keep the business running at this point,” Jaime Katz, senior equity analyst at Morningstar, said in an interview. “Companies cannot cut their way to greatness, and we contend that holds true for Bed Bath,” Morningstar analysts wrote in a Tuesday report.
The announcement of additional cuts comes roughly five months after the company pressed forward with a turnaround plan that involved deep cost-cutting measures, store closures and layoffs in August.
The company’s share price rose 27% Tuesday to $2.07. The pop in the stock still puts it well below its 52-week high of $30.06. Morningstar analysts writing Tuesday held their fair value estimate of the company at $0, writing that they believed the gain on the day’s news stemmed from short interest covering rather than “fundamental improvement.”
Bed Bath and Beyond’s earnings call lasted just over nine minutes and did not include executives such as interim CFO Laura Crossen or a question and answer period. The company’s decision to opt for the spare format could reflect some of the moving parts that the company is now dealing with.
“Most likely the die is already cast on the bankruptcy process and they are just not quite ready to put out a public announcement, or the board is close to reaching an agreement on the sale of the company, which would obviously avoid the bankruptcy process,” Keith Meyer, global leader of the CEO and board practice at Allegis Partners, wrote in an emailed response to questions.
Katz, who had anticipated getting a better understanding of what happened in the quarter, said executives might not have wanted to discuss the numbers because they were unaudited as the company announced last week that it would be late finalizing the numbers for the quarter.
Looking ahead beyond the financial pressures, Morningstar’s report said one of the key challenges that the retailer faces is that it has lost the appeal it once had with customers.
“While the company has taken extraordinary measures to reduce costs, including a plan to reduce selling, general, and administrative expenses by $500 million, we don’t think it will restore consumer interest in the brand — in our opinion, this would be the key factor driving a resurrection of the business,” the report states.
Bed Bath and Beyond could not immediately be reached for comment.