Home goods retailer Bed Bath & Beyond ( BBBY ) will report its fiscal first-quarter numbers on June 22. The company is expected to post its quarterly numbers after the market close, with the consensus calling for earnings of $0.66. During the same period last year the company had earnings of $0.80. Year to date, the stock has fallen 13.7%.
BBBY was recently trading at $35.32, down $13.51 from its 12-month high and $1.69 above its 12-month low. Technical indicators for BBBY are bearish with a strong downward trend. The stock has recent support above $33.50, and has recent resistance below $37.35. Of the 14 analysts who cover the stock, 12 rate it a "hold", and two rate it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
So far the earnings season has been rather mixed for retailers. Retailers that have managed to improve their e-commerce business enjoyed nice gains on their quarterly reports, but those retailers that have not managed to improve their e-commerce business were punished. While other retailers are closing brick-and-mortar stores and putting more attention in e-commerce, Bed Bath & Beyond is actively opening more locations, planning to open 30 new stores over the next year, while closing 15 to 20 existing locations. It is encouraging to see them closing some locations, but the net result will be more locations, which could come back to haunt the company as consumers continue to do more shopping online. Last quarter the company reported comparable same-store sales fell in the low single-digit range. It did enjoy 20% growth in its online business, which helped lift overall comparable sales by 0.4% for the quarter. Wall Street will need to see further growth in the company's e-commerce business, as well as better comparable sales figures. BBBY has a very low P/E of 7.6, so the downside does appear to be limited, but there is additional downside risk and any positions should have solid stop losses in place just in case the quarterly numbers do disappoint.
Stock Only Trade
If you're looking to establish a long stock position in BBBY, consider buying the stock under $35.25. Sell if it falls below $31.75 or take profits if it gets to $40.50.
If you are looking for a bullish hedged option trade on BBBY, consider an August 25/30 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (30.5% annualized*) and the stock would have to fall 14.4% to cause a problem.
If you are looking for a bearish hedged option trade on BBBY, consider an August 40/45 bear-call credit spread for a 30-cent credit. That's a potential 6.4% return (15.2% annualized*) and the stock would have to climb 14.1% to cause a problem.
Covered Call Trade
If you want to set up a long position in the stock, consider a covered call trade to lower your cost basis. Consider an August $35.00 covered call. Buy BBBY shares (typically 100 shares, scale as appropriate), while selling the August $35.00 call for a debit of $33.35 per share. The trade has a target assigned return of 4.9% and a target annualized return of 28.8% (for comparison purposes only).