Bed Bath & Beyond Weakness Is an Opportunity

The home-goods giant isn't following the trends of the improving retail landscape -- at least right now. As the market punishes the stock, investors have a chance to get in on a great business.

Apr 16, 2014 at 8:45AM

According to the market, Bed Bath & Beyond (NASDAQ:BBBY) is falling behind. The home-goods megaretailer had the unfortunate luck of delivering mediocre guidance at a time when the industry at large should be growing comfortably from last year's levels. But in its recently ended quarter, the company didn't perform poorly, especially considering some pretty serious headwinds. Investors may want to keep their eye on the long game, as the business has plenty to offer shareholders. Is Bed Bath & Beyond deserving of its 52-week low? Let's find out.

Cleanup on Aisle 1
Sales fell in Bed Bath & Beyond's final quarter of fiscal 2013 on the back of difficult weather, a cautious consumer, and ever-increasing competition. For a company that has a massive load of retail square footage to leverage, the industry trends may look daunting.

However, the company still managed a 1.7% same-store sales gain for the quarter ended on March 31. The number is particularly compelling in light of the fact that 2012's fourth quarter delivered a 2.5% same-store sales jump. In an extremely challenging quarter, this business still leaped above a short-term high-water mark.

Still, investors and analysts apparently wanted more, especially looking forward. Management guided for $0.92-$0.96 in earnings per share for the current quarter -- as much as $0.10 under estimates. With March retail figures trickling in and showing a strong recovery from the weather-battered January and February results, it is unsettling to see Bed Bath & Beyond failing to join the broader improvement. Sectorwide sequential seasonally adjusted sales rose 1.1% in March -- the biggest sequential climb since September 2012.

Negative Nancys
Bed Bath & Beyond's scale is undeniably at the top of its game. While large-format brick-and-mortar retailers have an uphill battle against the rise of e-commerce, this is one player that is positioned well to endure. The company's increasing portfolio of brands, from its namesake stores to Cost Plus World Market, offers total product variety that few can match in the physical realm. Store footprints are expanding, and the company is playing into long-term tailwinds for the home-goods and decor industry.

At less than 11 times earnings, the company is priced attractively for its long-term prospects. With an EV/EBITDA of 6.68 times, the value proposition is even more apparent. This is a stock that has appreciated more than 100% over five years. While that is not tremendous, it is steady and convincing. Consider this short-term weakness an opportunity to own a great business at a great price.

The greatest thing Warren Buffett ever said
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers