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Why Shares of Bed Bath & Beyond Popped 6.1% Wednesday and What Investors Should Think

By Daniel Miller – Aug 21, 2019 at 11:38AM

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Strong results from major retailers are pulling consumer discretionary stocks higher Wednesday. What does this mean for Bed Bath & Beyond investors?

What happened

Shares of Bed Bath & Beyond (BBBY -1.64%), a leading home-furnishings retailer, jumped as much as 6.1% higher Wednesday morning (before giving some of those gains back) after other retailers' strong financial results pulled much of the consumer discretionary sector higher. What should Bed Bath & Beyond investors think?

So what

Target Corporation and Lowe's Companies both reported better-than-expected results that pushed their respective stocks as much as 19.3% and 12.4% higher Wednesday morning. And retail juggernaut Walmart reported a solid quarterly result last week that calmed investors' uncertainty and even gave them reason to believe the consumer environment remains healthy.

Woman shopping at a bedding retailer.

Image source: Getty Images.

Now what

Major retailers posting better-than-expected results and a growing sense that the consumer retail environment is still healthy, despite uncertainty around trade tensions between the U.S. and China, is good news for Bed Bath & Beyond investors, but it doesn't alleviate the company's specific headwinds. Just about a month ago, the company announced it would slash its corporate staff by 7%, including the elimination of its chief operating officer role, in an attempt to lower operating costs. It was one move in the company's overall strategy to reset its cost structure, refine the organizational structure, stabilize and grow sales, and optimize assets.

Investors should take Bed Bath & Beyond's stock price increase today with a grain of salt. The company has a challenging turnaround ahead of it. And while Target's excellent results, along with those of other major retailers, helped pull retail stocks higher Wednesday, remember that Target is trading at an all-time high Wednesday, while Bed Bath & Beyond has shed roughly 82% of its value over the past three years.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends Lowe's. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
$5.99 (-1.64%) $0.10
Walmart Stock Quote
$132.53 (2.18%) $2.83
Target Corporation Stock Quote
Target Corporation
$151.79 (2.29%) $3.40
Lowe's Companies, Inc. Stock Quote
Lowe's Companies, Inc.
$193.92 (3.25%) $6.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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