The Ratings Game: Bed Bath & Beyond has laid out its transformation plan, now analysts are focused on execution

The Bed Bath & Beyond transformation began almost immediately after Mark Tritton was named chief executive a year ago.

Now, the company says it has momentum, as evidenced by the second-quarter earnings beat and the mid-single-digit comp sales growth in September and October.

“The team is working in a completely different way from the past,” said Gustavo Arnal, Bed Bath & Beyond’s chief financial officer, in a discussion with MarketWatch after the investor event. “It’s a work in progress, indeed a transformation. We’ve accelerated that transformation. And we’re starting from position of strength.”

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Data collection and use is a key component of the transformation. Bed Bath & Beyond has found that 35% of shoppers walk away purchasing just a single item, for example. And the company discovered that, after evaluating almost 300 million promotions, about 40% of them were “ineffective,” failing to drive incremental sales.

The company says it is addressing these issues with a new approach to pricing and communications that emphasizes transparency as well as value.

All the while, the company is focused on “financial resiliency,” Arnal says, highlighting the $ 2 billion in liquidity the company had at the end of the most recent quarter.

“We have a financial fortress to invest in the business and still be protected,” he told MarketWatch.

“We’ve laid out the road map and it couldn’t be clearer.”

Analysts are ready for results.

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“In our view, it is clear the new management team understands the issues within the business and has a coherent strategy to address each one of these issues, which should translate in sales and Ebitda growth,” wrote Raymond James analysts led by Bobby Griffin.

“Given that Bed Bath & Beyond is still clearly a ‘show me’ story, we are admittedly going to be less patient with our rating if we are not seeing progress in the results.”

Raymond James highlighted Bed Bath & Beyond’s stock move, with shares nearly doubling, up 97.6% over the past three months. For the year to date, shares are up 24% while the S&P 500 index SPX, +0.79% has gained 2.2%.

Raymond James rates Bed Bath & Beyond stock strong buy with a $ 26 price target.

Wells Fargo analysts say that the company’s executive team “talked a good game” but will be keeping an eye on results.

“[T]he transformation won’t be cheap, heavy lifting remains, and the spotlight shifts to execution during a period of increasing macro uncertainty, wonky year-over-year comparisons, and rapidly shifting consumer needs and preferences,” analysts said.

Wells Fargo rates Bed Bath & Beyond stock underweight with a $ 17 price target.

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“We applaud the plan, but continue to see significant risk from competition and valuation,” said KeyBanc Capital Markets in an analyst note.

KeyBanc rates Bed Bath & Beyond stock sector weight.

There are many plans and much work ahead, with Arnal discussing changes like revamping the merchandise lineup and supply chain and a continued focus on digital.

Still he says the company has a clear thought process, and there’s confidence that the company can manage the risk and grow despite the tumult from the coronavirus pandemic and the long road ahead.

“It’s going to be a different company next year,” he told MarketWatch.