: Bed Bath & Beyond’s customer base has dropped by 5 million since 2021

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Bed Bath & Beyond Inc.’s customer base has dropped to 35 million from 40 million, a sign that the home goods retailer needs to put money into its business to replace the loss of core shoppers, UBS said in a note.

During the company’s annual meeting in June 2021, Bed Bath & Beyond Chief Executive Mark Tritton talked about the company’s 40 million customers. On the fourth-quarter earnings call on Wednesday, he discussed 35 million customers .

“I think during the COVID moment, we definitely saw in 2020 and 2021 a one-time customer that was searching digitally and that’s affected our customer count in the short term. I think second to that is we had store closures,” Tritton said on the call, according to a FactSet transcript.

“I think what we’re seeing is a stabilization of that base and we’re really now investing in 2022 in those customers both current and future[…] we’re recovering out of that and we have plans to fortify that 35 million and make them stickier and build more new customers across multi-generations.”

Read: Bed Bath & Beyond says Q4 revealed unforeseen weaknesses and the strength of its baby-focused chain

UBS said the retailer has lost older customers, and needs to transform in order to appeal to younger shoppers.

“We believe its core baby boomer customers are past their prime spending years and millennials seem less inclined to shop at Bed Bath & Beyond,” analysts wrote in a note.

“Importantly, to resolve these issues, we believe Bed Bath & Beyond will need to significantly accelerate investments in its business. We think it needs to build out a modern supply chain system with state of the art distribution center networks. Plus, to attract new customers, it not only needs the right merchandise but also to meaningfully invest in marketing to increase its share of voice among millennials.”

UBS rates Bed Bath & Beyond stock sell with a $12 price target, down $1.

Bed Bath & Beyond swung to a loss in the fourth quarter; the FactSet consensus was for a profit of 3 cents per share. Sales also missed Street expectations. The stock was down 3.4% in Thursday trading.

Shares have rallied 17.7% for the year to date, but have slumped 30% over the last 12 months.

A bright spot in the print was the buybuy Baby business, which has reached $1.4 billion in sales for the year. A March letter from Ryan Cohen and RC Ventures had valued the business at “multiple billions,” which analysts quickly disputed.

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KeyBanc Capital Markets used the earnings information to estimate the value of the business at $1.0 billion to $1.5 billion, though analysts say they would need more detail.

“While the sale of Baby could support the stock in the short term, we ultimately believe fundamentals point to a lower share price, which remains the basis of our underweight rating,” analysts said in a note.

KeyBanc has a $10 price target on Bed Bath & Beyond shares.

Wells Fargo halved its price target to $10 from $20 and maintained its underweight stock rating after the earnings.

“Despite another activity campaign (calling for a streamlined turnaround and strategic alternatives), we view Bed Bath & Beyond as a structurally challenged asset, visibility remains low and the path ahead likely remains bumpy,” Wells Fargo said.

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