By Arriana McLymore
(Reuters) -Bed Bath & Beyond Inc on Thursday said it is seeing early signs that efforts to clear excess inventory are gaining traction and it expects its cash flow to break even in the fourth quarter, even as it reported a bigger-than-expected second-quarter loss.
“Of the owned brand inventory that we targeted and was comprised in our reserve, we’ve made headway in Q2 through about 1/3 of that inventory,” Interim Chief Financial Officer Lauren Crossen said on a Thursday earnings call.
Crossen said that the timing of continued progress depends on a “variety of factors,” including store closures.
Once known to be a “category killer” in home goods, Bed Bath’s stock and fortunes have slumped after its move to sell more store-branded products flopped and led to a reshuffle of its management team earlier this year.
Enhancing liquidity is top of mind for Bed Bath as it works to put its $500 million in new financing to use by opening new buybuy Baby stores, cutting back on its private-labeled brands, investing more in nationally branded vendors such as Caphalon and closing more than 150 Bed, Bath and Beyond stores.
Bed Bath on Thursday said its current liquidity is $850 million. The company burned through $325 million in the reported quarter.
Analysts at UBS have estimated that Bed Bath will burn through $1.5 billion in cash over the next eight quarters.
The company has also stopped remodeling stores and opening Bed Bath-branded locations to save on capital expenditures.
The big-box chain now aims to attract more consumers by selling more national brands and dishing out coupons but has a mountain to climb, with people spending less on home goods and an interim chief executive and finance chief in place.
“The data that we have on our customers, they’ve told us very specifically, they want variety, they want value and they want coupons. And those are the things that we’re going to be addressing in the upcoming periods,” Bed Bath and Beyond Interim Chief Executive Sue Gove said during a Thursday earnings call.
The company said it is seeing progress in its merchandising and inventory changes, but some analysts are skeptical that the retailer’s new inventory and merchandising strategies are viable.
“Bed Bath & Beyond is facing tough competition from off-price retailers and e-commerce vendors selling similar and cheaper home goods. Customers’ trust in the brand’s value proposition is being eroded,” said Shoggi Ezeizat, a consumer sector analyst at Third Bridge.
Bed Bath reported revenue of $1.43 billion, missing Wall Street estimates of $1.47 billion. The company’s net loss was $366.2 million, or $4.59 per share, for the second quarter, compared with a loss of $73.2 million, or 72 cents per share, a year earlier. Excluding items, Bed Bath lost $3.22 per share, compared with estimates for a loss of $1.85.
