Bed Bath & Beyond could face a challenging holiday season: Analyst

Yahoo Finance Live’s Brian Sozzi provides his take on Bed Bath & Beyond and how they could face a challenging holiday season.

Video Transcript

JULIE HYMAN: Bed, Bath & Beyond could face some trouble this holiday season. We saw sales plunge last quarter. New research from Jefferies shows the web traffic is down significantly for the month of November. And that's where we find Sozzi's Take today. Sozz.

BRIAN SOZZI: Yes, I'm going to sound like an overpaid tech executive and say I'm democratizing from Wall Street research here. And this is a really good note by the folks out of Jefferies tracking or web scraping the company's website to see how they've been doing this holiday season. So Jefferies team found two things, I think, are of importance. My full story on this is now on the Yahoo Finance home page.

Traffic to Bed, Bath & Beyond in November, their website down 19%. That is a massive, massive, massive decline. They also tracked website traffic for Bed, Bath & Beyond from Thanksgiving to Cyber Monday. And the news was even worse, traffic down 25%.

I mean, these are stunning declines for any company, but most especially for a company that has been struggling and has been on life support like Bed, Bath & Beyond. You would have hoped for some better results, especially as they have picked up discounts over the past few months to clear the unsold inventory they had in their stores.

But now the Jefferies team also, as a result of this, they see Bed, Bath & Beyond posting, really, a stunning 23% same store sales decline in the third quarter when they report in a couple of weeks. Keep in mind, in the second quarter, Bed, Bath & Beyond reported a 26% same store sales decline, so not much improving there. Jefferies also sees gross profit margins declining 550 basis points year over year in that third quarter. And then, oh, yeah, next year, they now see Bed, Bath & Beyond, they were expecting a slight sales increase next year. They're now looking for a 3 and 1/2% decline.

BRAD SMITH: I mean, the remarkable thing here is that anybody would even go to Bed, Bath & Beyond to initiate a search for something if they could also get that on Amazon or up against some of the categorical winners that we've already seen for Cyber Monday, which are smartwatches, which is Madden. Bed, Bath & Beyond doesn't have Madden. Bed, Bath & Beyond doesn't have an Apple Watch. Bed, Bath & Beyond probably doesn't have a Sony PlayStation in there either.

And so for all of those categories, yeah, on the web traffic front, they're not going to win out there, but it's about how going into next year, you've got either wedding registries that continue to come back to them, how they can continue to win in key categories that they can compete in. And that's where some of the consumer sentiment still, online, at least, has been shifting to a Walmart or a Target or an Amazon, even.

BRIAN SOZZI: Very good point. But what we do have here is my take. Fire the graphic here. Let's get that up on the board. Bed, Bath & Bust this holiday season. There is the return of the Sozzi Grinch--

JULIE HYMAN: Oh, the Grinch.

BRIAN SOZZI: --in a bed inside of a Bed, Bath & Beyond underneath some very discounted sheets. This is a company struggling mightily. At some point next year, they're probably going to have to raise more cash. Again, full story on this on the Yahoo Finance homepage. Bed, Bath shares really come under pressure, too.

JULIE HYMAN: Yeah, Brad brings up an interesting point. I mean, I wonder what their wedding registry business even looks like now. They used to really be--

BRAD SMITH: Yeah.

BRIAN SOZZI: Clean up.

JULIE HYMAN: --big in that category.

BRIAN SOZZI: They went on and clean up-- clean up on it. But look, Target has--

JULIE HYMAN: Target hasn't been--

BRIAN SOZZI: --thrived in this space. I mean, why not?

BRAD SMITH: Williams Sonoma.

BRIAN SOZZI: You can get a bag of groceries for your--

JULIE HYMAN: Macy's.

BRIAN SOZZI: --for somebody who's getting married. Get them a bag of groceries, and get them a gift and call it a day.

BRAD SMITH: I'm going to try to that.

BRIAN SOZZI: We need some groceries.

JULIE HYMAN: You'll register for groceries now?

BRIAN SOZZI: I mean, I don't know. This is a different world, Julie. I don't know. I'm not married. What do I know?

BRAD SMITH: I got my sister a ham sandwich for Christmas morning.

BRIAN SOZZI: Yes!

BRAD SMITH: See how the grocery bag--

BRIAN SOZZI: Best brother award.

BRAD SMITH: --for a wedding--

BRIAN SOZZI: Best brother award.

BRAD SMITH: --next year. I'm just going to get a large-- you're getting a grocery bag.

BRIAN SOZZI: You're coming to my wedding. I want that. I want a ham sandwich.

BRAD SMITH: Done deal.