Will Bed Bath & Beyond Inc. Earnings Make Shares Look Dirt Cheap?

The home-goods retailer trades at an inexpensive valuation, but is the stock a value trap?

Jun 24, 2014 at 1:02PM

On Wednesday, Bed Bath & Beyond (NASDAQ:BBBY) will release its quarterly report, and investors continue to worry about whether the home-goods retailer can stem the tide of competition to keep growing. Even as store-based peers Container Store (NYSE:TCS) and Restoration Hardware (NYSE:RH) have worked to distinguish themselves from other players in the home-furnishings space and to defend themselves against e-commerce threats, Bed Bath & Beyond has found it much more difficult to compete against online sellers offering the same basic goods at lower prices.

The rebound in the housing market helped Bed Bath & Beyond recover from a difficult time during the financial crisis, as the company managed to outlast a tough stretch that caused one of its major rivals to declare bankruptcy. Yet more favorable housing conditions have given new life to some of Bed Bath & Beyond's rivals, and The Container Store's recent initial public offering along with Restoration Hardware's impressive performance have drawn attention to the more specialized plays in the space. Let's take an early look at what's been happening with Bed Bath & Beyond over the past quarter and what we're likely to see in its report.

Source: Wikimedia Commons, courtesy Coolcaesar.

Stats on Bed Bath & Beyond

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$2.69 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's next for Bed Bath & Beyond earnings?
Investors have lost confidence in strong growth for Bed Bath & Beyond earnings, cutting 8% from their estimates for the May quarter and between 5% and 7% for their full-year projections over the next couple of years. The stock has also fallen, giving up 10% since late March.

Much of the decline in Bed Bath & Beyond's stock came after the company's results for the previous quarter showed sluggishness in its core business. Same-store sales only managed to rise 1.7%, as bad weather and some seasonal factors in the holiday shopping season held back its results. But the real negative surprise was that Bed Bath & Beyond expected similarly weak comps of about 1% to 2.5% in the May quarter as well, with guidance holding off on more substantial growth until later in the year. Earnings projections were also below expectations by as much as a dime per share for the quarter.


But Bed Bath & Beyond doesn't expect to go down without a fight. The retailer has recognized the difficulties with its subpar e-commerce channel, making substantial investments to improve the online customer experience in order to compete better against online-retail rivals. Moreover, Bed Bath & Beyond hopes to leverage both its namesake brand and the Cost Plus World Market chain to take advantage of better conditions in the housing market.

Still, what competitors Container Store and Restoration Hardware have done lately show the difficulties that Bed Bath & Beyond will face. Container Store has demonstrated its ability to go beyond the largest metropolitan areas to have great success in mid-sized markets, and it has aligned customer interests with its highest-margin products, enhancing its ability to profit in the long run. Meanwhile, Restoration Hardware managed to post impressive growth in its most recent quarter, defying negative trends in retail and taking full advantage of its reputation for upscale goods. As a store trying to be all things to all people, Bed Bath & Beyond will have trouble inspiring the excitement that these two rivals have seen lately.

In the Bed Bath & Beyond earnings report, watch to see what comments company management makes about the stock's performance and its business opportunities. With further room to make share repurchases, Bed Bath & Beyond has the capacity to make investors see the stock as a dirt cheap bargain -- as long as it can convert with solid earnings results.

Leaked: This coming consumer device can change everything
Imagine the multi-billion dollar sales potential behind a product that can revolutionize the way the world shops and interacts with its favorite brands every day. Now picture one small, under-the radar company at the epicenter of this revolution that makes this all possible. And its stock price has nearly an unlimited runway ahead for early, in-the-know investors. To be one of them and hop aboard this stock before it takes off, just click here.  

Click here to add Bed Bath & Beyond to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends The Container Store Group. The Motley Fool owns shares of Barnes & Noble and The Container Store Group. 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 www.fool.com/podcasts.

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 www.fool.com/podcasts, 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