• by Thom Forbes  @tforbes, April 11, 2019

With outside investors clamoring for the dismissal of its CEO, a revamping of its board and an overhaul of its operations, Bed, Bath & Beyond yesterday posted its first-ever annual yearly sales decline, but it nonetheless did better than analysts projected and proclaimed it “is making measurable progress.”

“The Union, N.J.-based company reported fourth quarter earnings of $1.20 per share on revenue of $3.31 billion. Wall Street was expecting the company to earn $1.12 per share on revenue of $3.33 billion,” Tony Owusu writes for The Street. “The company now expects fiscal 2019 earnings between $2.11 and $2.20 per share, excluding certain charges. Analysts polled by FactSet expected the company to earn $1.80 per share in the fiscal year.”

Still, its share price “was sinking more than 7% after hours, following the home-goods retailer’s fiscal fourth-quarter earnings,” Teresa Rivas reports for Barron’s.  That drop may have more to do with management digging in than it does with the earnings results themselves. 

“The back story. Bed Bath & Beyond has soared 71.5% in 2019. However, that’s not because it has cracked the retail code,” Rivas continues. “A big chunk of that move came after an activist investor targeted the company, which was ripe for change after years of questionable management decisions.” 

Indeed, “Bed Bath & Beyond has faced criticism from Legion Partners Asset Management LLC, Macellum Advisors GP LLC and Ancora Advisors LLC, which control a combined stake in the company of about 5%. The investors have said the company failed to adapt over time and allowed costs to increase, eroding value for shareholders. They also called for chief executive Steven Temares to be replaced and nominated a slate of directors for the board,” Maria Armental writes for the Wall Street Journal.

“The company on Wednesday named a new lead independent director and pledged additional changes to its board, governance structure and compensation practices. It also raised its quarterly dividend by 1 cent a share to 17 cents,” Armental adds.

But during the earnings call, transcribed here by Seeking Alpha, executives “made it clear it wasn’t going to address the demands made by a group of outside investors several weeks ago calling for the company’s management and board to be sacked,” Warren Shoulberg writes for Forbes.

“That said, the normally reticent, indeed painfully private, company released a level of specificity about its operations that was pretty much without precedent over its more than a quarter-century as a public company,” he continues. “In prepared remarks and answers to questions, the company’s management, led by CEO Steven Temares, left little doubt it does not intend to roll over and let the barbarians in the gate. He defended the company’s multiple nameplates -- something the agitators want to reduce -- as a plus rather than a negative.”

Also, “Bed, Bath & Beyond has undertaken efforts to improve gross margin by changing its product mix to drive sales to better margin categories and by making supply chain improvements, lowering costs,” Mamta Badkar writes for Financial Times.

“Like other retailers, Bed, Bath & Beyond has faced competition from online rivals and declining foot traffic to its stores. Earlier this year the company blamed tariffs on imports from China when it cut its full-year outlook,” Badkar points out. It also “named Patrick Gaston as lead independent director and said it plans to announce additional changes to its board, governance structure and compensation practices in the near future,” she adds.

“But these are relatively small changes for a company that needs a major overhaul,” observes Bloomberg’s Sarah Halzack. “Take, for example, its plan to expand the number of stores that carry furniture. The retailer has talked for years about this category being a major revenue opportunity and a way to establish itself as a winning destination for all things home-related; executives have said they expect to go from 70 stores with this offering to 150 in 2019. But that’s not much, considering the company has almost 1,000 Bed Bath & Beyond locations. 

“And then there’s its plans for ‘next-generation stores,’ a select group of locations that are piloting new approaches to merchandising, use of space, or labor allocation. I’m very much in favor of Bed Bath & Beyond rethinking its current look, which I might currently describe as floor-to-ceiling clutter. However, the next-generation initiative lacks clarity,” Halzack continues.

Sounds like a job for Marie Kondo, as well as Mr. Gaston.