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Why Bed Bath & Beyond Stock Surged Today

By Jeremy Bowman - Updated Apr 16, 2019 at 9:36PM

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Shares of the home-goods retailer jumped on a bullish long-term outlook from the company.

What happened

Shares of Bed Bath & Beyond (BBBY 21.82%) were rising today after the battered home-goods retailer gave an upbeat outlook in its third-quarter earnings report. The news was a rare bright spot for the retail sector today as most sector stocks were falling on underwhelming holiday sales reports from Macy's and Kohl's.  

However, Bed Bath & Beyond was unaffected by that trend, and the stock was up 12.5% as of 1:37 p.m. EST.

A woman selecting pillows in a store.

Image source: Getty Images.

So what 

Bed Bath & Beyond, which has seen profits evaporate in recent years as it's lost market share to online competitors like Wayfair and more nimble retailers like Home Goods, said that it was ahead of schedule to stem its profits slide and projected flat earnings-per-share growth in fiscal 2019, which begins in March, and a return to growth by fiscal 2020, eliciting cheers from investors. 

For the past quarter, Bed Bath & Beyond again delivered another round of disappointing results as comparable sales slipped 1.8% in the quarter, and earnings per share tumbled from $0.44 a year ago to $0.18, though that did beat estimates by a penny.

Now what 

Shares of the retailer, which also owns World Market and buybuy Baby, are down 80% over the last five years even after today's jump, a sign of the retailer's troubles, but that low price means the stock is arguably a value if it can return to growth as it trades at a P/E of just 7 based on the $2 EPS forecast for this year.

Still, returning to profit growth will not be easy for a retailer that appears to be overstored with more than 1,500 locations across the country. It's clear why the stock is rallying on such an outlook, but Bed Bath & Beyond has squandered multiple opportunities in the past, wasting money on share buybacks and a generous dividend payout. I'd be skeptical of a turnaround until the company shows fundamental comp sales and profit growth.

Check out the latest Bed Bath & Beyond earnings call transcript.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Wayfair. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$12.95 (21.82%) $2.32
Wayfair Inc. Stock Quote
Wayfair Inc.
W
$68.62 (6.36%) $4.10

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