Bed Bath & Beyond (BBBY) reported second quarter results that further depressed sentiments around a turnaround in operations. The company downgraded its EPS guidance from $4 to $3 due by lower than expected comp figures and an 11 cent impact from one-time items. With the stock down nearly 15% (at the time of writing), I think investors should look at the prospect of finding cash in trash instead of emphasizing the lack of improvement in business fundamentals. If there is a sustained dip greater than these levels the stock is likely to trade at atrociously cheap multiples with a decent dividend yield that is likely to be sustainable.
Q2 Results and Commentary
If I had to sum up the message from the earnings call in one sentence I would put it this way. A fog of uncertainty awaits the company and this could weigh on the value of the stock. Analysts tried to understand whether second quarter operating margins could mark the bottom and therefore would hover around 5.7% henceforth. The company though was non-committal. It maintained that operating margins beyond this year will depend on industry conditions. I think this is just another way saying - we are not really sure if the ongoing onslaught in our industry has approached its expiry date yet.
