Bed Bath & Beyond has posted another quarter of sales growth after a long period of decline, but an analyst believes the company still has a lot to prove in the coming months.
The company’s net revenues rose 28 per cent to $361 million in the second quarter ended June 30, marking its second consecutive quarter of growth following 19 quarters of decline.
Neil Saunders, MD of GlobalData, noted that the numbers include revenue from the newly acquired The Brand House Collective (Kirkland’s) business.
“Last year, The Brand House Collective had quarterly sales of around $75.8 million as a stand-alone business. So, if that’s factored in, growth for the two combined businesses comes in at a much less impressive 0.9 per cent on a simple pro forma basis.
“The periods are not perfectly aligned, but the calculation provides a much better indication of the underlying performance which, honestly, isn’t all that impressive given it comes in below overall market growth,” he said.
Saunders expects such a big boost in sales to continue in the quarters ahead as The Container Store and various other acquired entities come into the fold.
“The acid test isn’t whether these acquisitions inflate revenue in the short term – they will – but whether management can turn a somewhat random collection of brands into a cohesive group capable of generating long-term organic growth,” he added.
On the bottom line, net loss widened from $19 million a year ago to $39 million, mainly due to acquisition-related costs, restructuring costs, and non-cash store-closure impairments.
Corporate transformation
In a letter to shareholders, CEO Marcus Lemonis said the parent company is changing its name to Neighborhood Intelligence and will begin trading on Nasdaq under the ticker NXH on August 17. Its corporate headquarters will also relocate to Nashville, Tennessee.
The move reflects the company’s new organization, which centers around three interconnected pillars: Omnichannel retail, which sells furniture and home goods; home services, which provides remodeling and maintenance services; and home ownership, which offers real estate brokerage, financing partnerships, insurance and related products.
Management said the pillars are designed to create an ecosystem that serves customers throughout the entire homeownership journey with the ultimate goal of making homeownership simpler and more affordable while creating long-term value for shareholders.
“Our current and planned operating brands will remain at the center of our customer relationships,” said Lemonis.
“Neighborhood Intelligence is the intelligence layer that connects them, and it does not replace the role of our consumer brands. It makes each of them smarter, more connected, and more valuable while preserving the unique identity and trust our customers already know,” he added.
According to Saunders, the proper integration of individual brands reflects a wider challenge of what the enlarged group wants to be.
“While there is absolutely some merit in the narrative being presented, we are concerned that the vision is too lofty in aspiration and too lacking in detail and precision. And ultimately, that might prove its undoing – especially in terms of how it’s presented to the customer.
“The proof point in whether this vision can successfully come to life will ultimately come from being able to generate sustained top-line growth with some good profitability – which will also rely on finding high synergistic cost savings. This isn’t just important as evidence; it’s also needed because the new business model is more complex, riskier and capital-intensive,” the analyst explained.
“In short, there are plenty of interesting moves here, but there’s also still a heck of a lot to prove,” he said.
