Bed Bath & Beyond Inc (BBBY.US) shares tumbled nearly 22.0% on Wednesday after the company reported a drop in quarterly comparable sales and announced the departure of CEO Mark Tritton, saying it was time for a leadership change. Independent director Sue Gove will act as temporary CEO until a new candidate is found.
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The housewares retailer posted an adjusted loss of $2.83 a share on revenue of $1.46 billion, down a whopping 25% year over year, while analysts polled by FactSet were expecting a loss of $1.39 a share on revenue of $1.5 billion.
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Comparable sales tumbled 27%, while gross profit margin fell to 23.9% from 32.4% it recorded in the prior-year quarter.
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Company plans to accelerate markdowns of its existing inventories "in order to right-size inventory levels commensurate with the declining sales trends."
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New CEO said the group suffered "an acute shift in customer sentiment" that has "materially escalated" into the summer months.
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"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," she said. "The simple reality though is that our first quarter's results are not up to our expectations, nor are they reflective of the Company's true potential."
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In recent years Bed Bath & Beyond Inc has been burning cash at a very fast pace. As a result cash flow from operations dropped to negative $400 million and company only has $107 million in cash on its balance sheet. If the current situation does not change, then these funds will be enough for the company to operate for less than three quarters.
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Management said, "We are committed to addressing the urgent issues that have been impacting sales, profitability, and cash flow generation." However taking into account worsening economic conditions the management has a difficult task ahead of them.
Bed Bath & Beyond Inc (BBBY.US) stock has been trading in a downward trend recently and if current sentiment prevails key support at $4.00 may be at risk. This level is marked with a lower limit of the 1:1 structure and previous price reactions. In case of a sentiment shift, the nearest key resistance to watch is located around $14.05 and coincides with 78.6% Fibonacci retracement of the last upward wave. Source: xStation5
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