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Bear of the Day: Bed Bath & Beyond (BBBY)

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Founded in 1971, Bed Bath & Beyond (BBBY - Free Report) is an omnichannel retailer offering a wide selection of domestic merchandise and home furnishings.

The company operates 1,546 stores (as of February 2017), including 1,023 Bed Bath & Beyond stores, and remaining under the names of World Market, Cost Plus World Market, Cost Plus, buybuy BABY, CTS and Harmon, in the US and Canada. They also offer products through various websites.

Weak Results Reflect Rising Challenges

The company reported Q1 results last week. Adjusted earnings of 58 cents per share were down 27.5% year over year and also below the Zacks Consensus Estimate of 66 cents. Sales were also below estimates.

While comparable sales from digital channels had strong growth, comparable sales from stores declined in the mid-single-digit percentage range year-over-year.

Shares fell about 12% to their lowest level in eight years after the report.

Falling Estimates

Analysts have slashed their estimates for the company after weak results.  Zacks Consensus Estimates for the current and next fiscal year have fallen to $4.04 per share and $3.91 per share from $4.29 each, before the results.


The company had missed in three out of past four quarters, with an average negative surprise of 7.1%.

The Bottom Line

In addition to disappointing foot traffic in malls, the retail space is going through a shift toward online shopping, particularly from Amazon. With tightening labor markets, wage pressure has also started hurting retailers.

The stock is down about 25% year-to-date but a rebound any time soon does not appear likely. Investors looking for a better play in the Retail sector could consider Big Five Sporting Goods (BGFV), a Zacks Rank #1 (Strong Buy) stock.

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