• by Sarah Mahoney  @mahoney_sarah, January 7, 2022

Bed Bath & Beyond, in the midst of an ambitious multiyear turnaround effort, is hitting all kinds of speed bumps. The company just released financial results well below forecasts and concedes it is facing supply-chain struggles and promotional challenges, even as it steps up its efforts to roll out private-label products in fiercely competitive categories.

Based in Union, New Jersey, the retailer’s net sales for the third quarter tumbled 28% to $1.88 billion. Comparable sales dropped 7% from the third quarter of last year, falling 4% compared to the same period in 2019. However, sales at its Buybuy Baby unit grew by a percentage in the mid-teens.

Losses for the quarter swelled to $276 million, compared to a loss of $75 million a year ago.

Still, CEO Mark Tritton says the company’s transformation plan is on track. “Our customer acquisition strategy for the Bed Bath banner is gaining traction, as evidenced by our Beyond+ loyalty program, which grew by nearly half a million members after one of our largest new subscriber quarters,” he noted in the announcement.

Supply-chain struggles, an issue for many retailers, hit the chain hard, leaving it unable to fulfill the goal of $100 million in sales.

“It does show that the brand is alive and well and that we have demand,” Tritton later said in an interview on CNBC’s “Mad Money” with Jim Cramer. “That we can’t meet it absolutely kills me. It’s a real opportunity for [2022].”

Some observers aren’t so sure and think the sharply disappointing results signal more extensive problems. Traffic in stores remains negative year-over-year, writes Seth Basham, who follows the company for Wedbush Securities, and digital sales dropped 9%.

“The company’s value proposition is not resonating,” he writes. And while the company raised some prices to protect profit margins, sales suffered as a result.

“Indeed, Bed Bath & Beyond lost significant market share over the quarter in its core stores,” writes Basham, who currently rates the company as “neutral.”

Morningstar’s Jaime M. Katz also thinks Bed Bath & Beyond is losing traction in its turnaround efforts. She expects the retailer’s stock price to continue to be bumpy given the tight labor market, supply-chain woes and the implementation of some of its cost-cutting efforts.

Longer term, however, Katz is more optimistic, albeit in a lukewarm way. “We contend that upside to profitability still exists, largely from higher uptake of private-label products, supply chain improvements, and further cost-cutting,” she writes. “These efforts should support our tepid decadelong forecast, which includes sales growth of 1%-2%.”

The retailer also announced plans to shutter an additional 37 stores in 19 states, scheduled for early this year. In 2020, it announced plans to shut down 200 underperforming stores.