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Bed Bath and Beyond (BBBY) Loses its Place in Nasdaq-100

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The NASDAQ-100 Index, a pool of 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization, as part of its annual re-ranking process has decided to remove Bed, Bath & Beyond Inc. . This decision will take effect from Dec 19, 2016.

The re-balancing and re-ranking of the index is done every year in December, to compare the index members with other leading non-index members. To this effect, NASDAQ reshuffles the stocks in the index to include new members that meet the eligibility criteria and remove the ones that are no longer eligible.

Other companies that are slated to exit the index, as part of this year’s re-balancing, are NetApp Inc. (NTAP - Free Report) , Stericycle Inc. (SRCL - Free Report) and Whole Foods Market Inc. . To replace these, stocks like Cintas Corporation (CTAS - Free Report) , Hasbro Inc. (HAS - Free Report) , Hologic Inc. (HOLX - Free Report) and KLA-Tencor Corporation (KLAC - Free Report) will be added to the pool.

Coming back to Bed, Bath & Beyond, the company’s stock underperformed the NASDAQ-100 index in the past one year. While the NASDAQ-100 index recorded growth of 7.9% in the timeframe, shares of Bed, Bath & Beyond declined 7.9%.

Not only this, we noticed that the stock has lagged the Zacks categorized Retail - Miscellaneous/Diversified industry, which has grown 11.2% over the past one year.

The underperformance in Bed, Bath & Beyond’s stock price can be attributed to its dismal top-line performance for almost 12 quarters, only with the exception of the fourth quarter of fiscal 2015. Also, the company has an average negative earnings surprise of 1.5% for the trailing four quarters. The company’s results continue to bear the impact of sluggish mall traffic and high promotional costs. Further, due to its exposure to global markets, the company remains prone to various risks associated with international operations like currency headwinds.

Further, the company’s forecast of soft comparable sales (comps) and weak margin trends will continue to hurt results throughout fiscal 2016. While comps are expected to bear the impact of lower transactions, margins will continue to be hurt by soft merchandise margins and a rise in coupon cost. This is likely to weigh on the company’s bottom lines.

However, this Zacks Rank #4 (Sell) company remains focused on strategic initiatives like store expansion, eCommerce enhancement and improvement of customer services, which remain as growth catalysts. Moreover, the company’s constant shareholder-friendly moves are noteworthy.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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