We reiterated our long-term Neutral recommendation on
Bed Bath & Beyond Inc.
) with a target price of $69.00.
Why the Reiteration?
Bed Bath & Beyond is a leading operator of domestic
merchandise and home furnishing stores in the U.S. A strong
countrywide network of more than 1,100 stores, coupled with its
strategic effort to align merchandise according to regional
climate and demographics impart it a competitive edge and
strengthen its position in the market.
Moreover, the company is strategically expanding its store count
while increasing productivity of existing stores at the same
time. In the long run, the company expects to operate over 1,300
Bed Bath & Beyond stores across the U.S. and Canada, and
plans to expand other concepts from coast to coast.
Further, the company continually reviews and prioritizes its
capital needs, making strategic investments to position itself
for long-term success. Apart from sustained capital investment in
store expansion/refurbishment, the company is investing to
upgrade its information technology. Major projects include mobile
sites and apps upgrade, enhancement of network communications in
stores, implementation of point-of-sale improvements and building
as well as equipping and staffing its new IT Data Center to
support ongoing technology initiatives.
A debt-free balance sheet and robust liquidity position provide
Bed Bath & Beyond with adequate financial flexibility. On the
flip side, the company's third-quarter fiscal 2013 top and
bottom-line results were disappointing as both missed the Zacks
Consensus Estimate. The company also provided a tempered outlook
for the fourth quarter of fiscal 2013.
Additionally, the company's margins remained soft during the
third quarter due to increase in coupons, and their redemption
and shift in the mix of merchandise sold to lower margin
categories. Going forward, we expect this weakness to continue
due to persistence of the above factors in the remainder of
fiscal 2013 and the ongoing consolidation of World Market and
Moreover, the company altered its operating profit margin
forecast, expecting it to deleverage for both the fourth quarter
and fiscal year. The seasonality of its business and
macroeconomic challenges also offer considerable resistance.
Other Stocks to Consider
Currently, Bed Bath & Beyond carries a Zacks Rank #4 (Sell).
However, better-ranked retail stocks include
Barnes & Noble, Inc.
Tractor Supply Co.
). While Barnes & Noble carry a Zacks Rank #1 (Strong Buy)
Staples and Tractor Supply have a Zacks Rank #2 (Buy).
BED BATH&BEYOND (BBBY): Free Stock Analysis
BARNES & NOBLE (BKS): Free Stock Analysis
STAPLES INC (SPLS): Free Stock Analysis
TRACTOR SUPPLY (TSCO): Free Stock Analysis
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