A Closer Look At Bed Bath & Beyond's 'Challenging' Quarter

Bed Bath & Beyond Inc. (NASDAQ: BBBY) had a disappointing second quarter earnings report, highlighted by a worse-than-expected decline in same-store sales. By Wednesday morning, Bed Bath & Beyond's stock lost 14 percent and was trading near $23 per share.

Despite the stock's selloff, investors shouldn't necessarily be looking to buy the dip, according to analysts at Baird Equity Research. Analyst Peter Benedict maintains a Neutral rating on Bed Bath & Beyond's stock with a price target lowered from $28 to $23.

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The retailer's second quarter was "challenging" especially since earnings per share was 20 percent below what the Street was looking for, Benedict said. On top of that, same-store sale trends and gross margin headwinds are "showing no signs of moderating" and the competitive landscape and market share shifts will continue beyond fiscal 2017.

Meanwhile, management's initiatives to generate $150 million of cost saving over the next few years implies a heavy investment rate moving forward as the company needs to stabilize its top-line. The company will likely need to reinvest any of the savings back into is business if it wants to see any growth in the top-line.

"While we see an opportunity to drive incremental sales and operational efficiencies, visibility into the timing (and level) of EBIT$ stabilization remains poor," Benedict wrote.

Finally, while the company lowered its fiscal 2017 earnings per share outlook from $4.10 to $4.50 to around $3.00, the analyst is lowering his estimates from $3.95 per share to $3.00. His fiscal 2018 estimates were also lowered from $3.55 per share to $2.35 per share.