Bed, Bath and Beyond highlights the ongoing inventory purge as consumer slow

Today Bed, Bath & Beyond reported earnings that were well-shy of expectations with year-over-year comps down 24% in store and 21% online. Earnings were a loss of $2.83 compared to +$0.05 expected.

The story is bloated inventories and the loss this quarter didn’t even include another $1.66/share for inventory and port fees.

Sue Gove was named the interim company CEO and had this to say:

“I step into this role keenly aware of the macro-economic environment.
In the quarter there was an acute shift in customer sentiment and, since
then, pressures have materially escalated. This includes steep
inflation and fluctuations in purchasing patterns, leading to
significant dislocation in our sales and inventory that we will be
working to actively resolve.”

One of the ways they’ll resolve it is by dumping inventory at discounted prices, something we’ve also heard from Target and Wal-Mart.

The company cited a 15% increase in current inventory and a 25% decline in sales which they will “work aggressively to clear.”

Looking ahead, they said comp sales continue to trail by 20%.

Other companies may say this is BBBY-specific but given what we’re hearing elsewhere and seeing in some measures of consumer sentiment, that’s hard to believe.

What might be skewing all of this is that consumers over-spent on goods during the pandemic and are now quickly pivoting to services. Hotel, airline and other travel costs are surging so it’s not necessarily about a tapped-out consumer.

Eventually we’ll see some normalization but there’s a risk that companies like BBBY don’t survive and that would mean more inventory liquidation and empty real estate.