We have retained our Neutral stance on specialty retailer,
Bed Bath & Beyond Inc.
), based on the company's strong quarterly performance, robust
outlook and store growth initiatives. However, skepticism
prevails over the company's margins performance given the soft
trends witnessed of late.
Bed Bath & Beyond, a leading operator of merchandise and
home furnishing stores in the U.S., enjoys a strong countrywide
network of more than 1,100 stores along with strict focus on
aligning merchandise to suit consumer preferences, bolstering its
position in the market.
We remain impressed by the company's initiatives of expanding
and renovating stores as well as its focus on refreshing its
merchandise mix to boost productivity. We believe these
initiatives along with its focus on boosting online presence and
making technological advancements should bode well for future
The initiatives are paying off well, as evident from the
company's fourth-quarter 2012 earnings that rose 13.5% to $1.68
per share, benefiting from the results of World Market (Cost Plus
Inc.) and Linen Holdings.
If we look at the company earnings surprise history, this
Zacks Rank #3 (Hold) company has surpassed the Zacks Consensus
Estimate in 2 out of 4 quarters, recoding an average beat of
1.00%. In the last reported quarter, the company's earnings were
in line with the Zacks Consensus Estimate.
The company also witnessed robust sales growth of 24.5% year
over year, driven by the aforesaid acquisitions as well as the
increase in comparable-store sales and new store openings.
Management now projects earnings per share in the
mid-single-digit to low-double-digit percentage range for fiscal
2013, while first-quarter fiscal 2013 earnings per share are
estimated to range from 88 cents - 94 cents. Net sales are
expected to rise 17% to 19% in the first quarter and by 5% to 7%
for fiscal 2013.
On the flip side, the company's margins remained soft during
the fourth quarter of fiscal 2012, driven by higher operating
costs, increase in coupons and their redemption, increased
markdowns and shift in the mix of merchandise sold to lower
Going forward, we expect this weakness to continue due to
persistence of the above factors in fiscal 2013 as well as the
ongoing consolidation of World Market and Linen Holdings.
Other Stocks to Consider
Besides Bed Bath & Beyond, other stocks to consider in the
specialty retail sector are
Big 5 Sporting Goods Inc.
Hot Topic Inc.
). Of these stocks, Cabela's and Big 5 carry a Zacks Rank #1
(Strong Buy), while Hot Topic has a Zacks Rank #2 (Buy).
BED BATH&BEYOND (BBBY): Free Stock Analysis
BIG 5 SPORTING (BGFV): Free Stock Analysis
CABELAS INC (CAB): Free Stock Analysis Report
HOT TOPIC INC (HOTT): Free Stock Analysis
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