Bed, Bath & Beyond Any Chance of Shining?
The company isn't likely to stand out in this environment.
But is now the time to shop for the stock given its recent run and ahead of its second-quarter earnings, which are due out tomorrow?
Here are my thoughts:
1. The fact that the company has beaten estimates in the last three quarters is a good sign. But perhaps that sword slices both ways. Like Pavlov's dogs, investors may start to expect certain things after a while and I'm having some doubts as to whether it can continue the string of upside surprises quarter after quarter. Remember that many of its wares, which range from teapots to tissue boxes, can be found in many other stores.
2. At 19.2 times next year's estimate of $2.01, it looks pretty fairly valued right where it is. Take a gander at Wal-Mart (WMT), which has a huge foothold in bathroom and kitchen knickknacks (among other stuff). It can be grabbed for under 14 times this year's estimate.
3. Let's not forget about the competition it's likely to face from the Arkansas-based retailing giant, never mind Target (TGT), Pier One (PIR), and Williams Sonoma (WSM). Without having the largest footprint, lowest prices, and prettiest store, I don't see how it's going to stand out in this environment
4. Sadly, its sales haven't been off the hook, nor its gross margins on a tear. Sales were up an unimpressive 2.8% in the first quarter and comps were off about 1.6%. Its gross profit as a percent of sales came in at 39.4%, whereas in the first quarter of last year it was 39.8%.
5. On the flip side, the stock is near its 52-week high, and that could generate lots of ink and attention. I can still hear an old boss of mine saying: "New highs beget new highs."
6. I do believe it will meet or beat the $0.47 estimate for the second quarter. And if I'm correct, that could grab press and attention and cause the momentum the shares have seen recently to continue. You never know -- some institutions looking to pretty up their holdings might take a position as well, if that happens.
I don't think Bed Bath & Beyond is a bad company -- I've shopped the aisles many a time over the last dozen or so years that I've been married. But all things considered, I don't see myself bellying up to the stock any time soon.
Hey, have a great day!
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter