Bed Bath & Beyond (NASDAQ:BBBY) is often considered a casualty of the retail apocalypse. Its stock has been cut in half over the past five years as its revenue declined, aggressive promotions crushed its margins, and better-run competitors like Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Target (NYSE:TGT) lured away its shoppers.

But over the past 12 months, Bed Bath & Beyond's stock rebounded 30% after it hired Target's former chief merchandising officer Mark Tritton as its new CEO, divested its non-core businesses, sold some of its real estate, shuttered its weaker stores, renovated its remaining locations, streamlined its supply chain, and focused on expanding its e-commerce platforms.

Boxes of consumer electronics and appliances.

Image source: Getty Images.

But those turnaround efforts, which Bed Bath & Beyond admits will take several years, remain sluggish. Its revenue and comparable store sales declined 7% in fiscal 2019, which ended last February, and its net loss widened. Analysts expect its revenue to tumble 14% this year, partly due to pandemic-related closures in the first quarter and its recent divestments, with another full-year net loss. Its revenue is expected to dip another 4% in fiscal 2021 as it returns to profitability.

Those estimates indicate Bed Bath & Beyond isn't doomed yet. But instead of putting too much faith in its wobbly recovery, I believe investors should stick with a retailer that has already stabilized: Best Buy (NYSE:BBY).

How did Best Buy survive the retail apocalypse?

Back in 2012, Best Buy was in the same boat as Bed Bath & Beyond. It was losing shoppers to Amazon, Walmart, and other retailers, and visitors often used its stores as "showrooms" to test out products before buying them online. Its CEO also abruptly resigned over an inappropriate relationship with an employee.

But Hubert Joly, who served as Best Buy's CEO from 2012 to 2019, revived the business by fixing broken inventory systems, investing in employee training, matching Amazon and Walmart's prices, expanding its e-commerce platform, and using its brick-and-mortar stores to fulfill online orders. Joly also embraced Best Buy's "showroom" reputation by renting out its floor space to big brands like Apple and Samsung.

Best Buy's stock rallied more than 260% during Joly's tenure, and his successor Corie Barry has stuck closely to his "Renew Blue" playbook. Best Buy's total comps rose 4.8% in fiscal 2020, which ended last February, its total revenue increased 2%, and its adjusted earnings improved 14%.

Best Buy's growth accelerated throughout the pandemic last year as remote work and online learning sparked robust sales of new PCs, and analysts expect its revenue and earnings to rise 9% and 29%, respectively, in fiscal 2021. Next year, they expect its revenue to stay flat, and for its earnings to dip 3% against tougher year-over-year comparisons.

Bed Bath & Beyond faces a tougher uphill battle

Unlike Best Buy, Walmart, Target, and other big box retail survivors, Bed Bath & Beyond didn't prioritize the growth of its e-commerce business over the past decade.

Instead, it tried to boost its total revenue with fragmented acquisitions like Buy Buy Baby, Chef Central, Christmas Tree Shops, and Cost Plus World Markets -- which largely failed to generate sustainable comps growth. In 2019, a trio of activist investors claimed several of those acquisitions were driven by nepotism and used to enrich the company's founders.

Bed Bath & Beyond also chased Amazon with coupons and its Beyond+ membership program, which likely operated at a loss by offering free shipping (with no minimum purchase) and 20% discounts on all purchases for just $29 a year. These strategies crushed its margins without significantly reducing its inventories.

Bed Bath & Beyond's margins gradually stabilized under Tritton, who focused on divesting the company's real estate and non-core assets, optimizing its supply chain, expanding its e-commerce platform, and reducing its dependence on coupons and promotions. Unfortunately, its operating margins remain much lower than Best Buy's -- and it's running out of ways to cut costs.

BBBY Operating Margin (TTM) Chart
Source: YCharts

Bed Bath & Beyond also arguably inspires less brand loyalty than Best Buy. Many shoppers recognize Best Buy as a top place to buy consumer electronics and appliances, but Bed Bath & Beyond is still being crushed between Amazon, Walmart, and IKEA in the low-end market and premium retailers like Williams-Sonoma in the high-end market.

Best Buy's stock is still cheaper

Best Buy's stock has outperformed Bed Bath & Beyond's by a wide margin over the past five years, but it's still cheaper relative to its earnings growth.

Best Buy currently trades at just 14 times forward earnings, while Bed Bath & Beyond has a forward P/E ratio of 31. Best Buy still pays a forward dividend yield of 2.2%, while Bed Bath & Beyond suspended its dividend last April to conserve cash throughout the pandemic.

Bed Bath & Beyond could still be a great turnaround play if Tritton's plans pan out, but I'd like to see a few consecutive quarters of comps growth with expanding margins before I buy the stock. Meanwhile, Best Buy's low valuation, sturdy business model, and dependable dividend all make it a safer long-term investment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.