A Mom-Friendly Retail Stock Prepared to Stand Out

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You'll be able to snuggle up close to your mom this Mother's Day if you present her with a gift of Bed Bath & Beyond (Nasdaq: BBBY  ) .

The housewares purveyor is suffering from the tough economic climate like every other retailer, but unlike rivals Williams-Sonoma (NYSE: WSM  ) , Ethan Allen (NYSE: ETH  ) , and Linens 'n' Things, which just threw in the towel and declared bankruptcy, Bed Bath & Beyond has not taken a powder.

On the surface, the last earnings report looked like something of a cold shower. Revenue was off 3% while earnings fell by about 16% from the year-ago period (though share buybacks helped reduce the per-share decline in profits). Yet the quarter had one less selling week than it did last year, and the post-Thanksgiving sales week didn't fall into the quarter this time around. Account for those factors and Bed Bath & Beyond is still a cozy little number.

Of course not everything at the home furnishings retailer is as soft as a 500-thread count bed sheet or a pima cotton towel. Store expansions are going to be pushed out further than originally anticipated, and the company is facing the prospect of full-year comps coming in flat to negative.

Yet those are minor distractions to the overall story here. The Motley Fool Stock Advisor recommendation is opening more locations even as others fold, so that when the economy does recover, it will find itself ready to meet the pent-up demand from consumers. Even in dour times, Bed Bath & Beyond has been able to outsell the competition, and it's one of the reasons Linens 'n' Things is now seeking court protection. Linens sold $146 worth of merchandise per square foot in 2007; Bed Bath & Beyond sold $233 per square foot.

While I'm not enamored of the retailer's Christmas Shoppes or the baby clothes chain buybuy BABY it acquired as a sop to one of its directors, both can bolster revenue in an improving economy.

Considering that over the past year Bed Bath & Beyond's shares have lost 20% of their value (at one point they were down nearly 40%) and trade at just 16 times next year's earnings, I find they're still attractively priced. Most of the tough stains on the retailer have already come out in the wash. With a solid balance sheet, a growing footprint, and weakened competitors, the long-term prospects for Bed Bath & Beyond are such that it should be able to compete effectively against Wal-Mart (NYSE: WMT  ) and Target (NYSE: TGT  ) and still offer investors attractive growth prospects.

That's a warm, fuzzy feeling that's available in only one other place: the embrace of your mother's arms.

Mom's not around? Get cuddly with these related Foolish articles:


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Related Tickers

8/22/2014 3:59 PM
BBBY $64.03 Up +0.29 +0.45%
Bed Bath & Beyond CAPS Rating: ***
ETH $25.29 Up +0.07 +0.28%
Ethan Allen Interi… CAPS Rating: *
TGT $61.05 Down -0.02 -0.03%
Target CAPS Rating: ***
WMT $75.73 Up +0.18 +0.24%
Wal-Mart Stores CAPS Rating: ***
WSM $74.30 Up +1.71 +2.36%
Williams-Sonoma CAPS Rating: ***

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