Bed Bath & Beyond (NASDAQ:BBBY) stock opened lower by about 20% after the home goods retailer reported preliminary earnings for the third quarter of fiscal year 2022 and issued a stark going concern warning. The company expects to report sales of $1.259 billion, down 33% year-over-year (YOY) from $1.878 billion. The company attributed the sales decline to lesser inventory and lower customer traffic. On the bright side, selling, general, and administrative (SG&A) expenses are expected to be $583.6 million, down from $698 million YOY. CEO Sue Gove added:
“Today’s announcement underscores the importance of having initiated a turnaround at the start of the third quarter and why we strengthened our leadership team to execute each step with precision. Our plan has two anchors: the first enables us to refocus merchandising and inventory, operate more efficiently, and grow our digital and omni-capabilities, and the second focuses on strengthening our financial position.”
Still, the going concern warning has caused a large decline in BBBY stock. Let’s get into the details.
BBBY Stock Falls Amid Going Concern Warning
If a company has going concern, that means that it has enough capital to sustain itself for the foreseeable future. Bed Bath & Beyond has stated that there is “substantial doubt” for it to continue as a going concern. The company explained that it will explore opportunities to restore its going concern, such as debt or equity raises, delaying business initiatives, refinancing or restructuring debt, selling assets and relief under U.S. Bankruptcy Code. However, Bed Bath & Beyond warned that “These measures may not be successful.”
During the quarter, the company expects to report a net loss of $385.8 million, which includes impairment charges of about $100 million. A year ago, its net loss tallied in at $276.4 million. Therefore, net loss will likely grow by approximately 40%.
The retailer also stated that its complete earnings are delayed. As a result, it has filed a Notification of Late Filing with the U.S. Securities and Exchange Commission (SEC).
Going forward, Gove explained that the company will continue to place an emphasis on the Bed Bath & Beyond, buybuy BABY and Harmon brands. The CEO will offer more details on Bed Bath’s financial health during the earnings call next week.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.