Our growing economic troubles finally caught up with Bed Bath & Beyond
What analysts say:
- Buy, sell, or waffle? Twenty-one analysts follow Bed Bath, which garners eight buy ratings, 10 holds, and three sells.
- Revenue. On average, they're looking for sales to rise 4% to $1.62 billion.
- Earnings. Profits are predicted to plummet 29% to $0.27 per share.
What management says:
Things may be rough here at home, but Bed Bath is no longer a totally domestic operation. To the contrary, Bed Bath seems to be going all NAFTA on us lately, advising in May: "Following on our successful entry into Canada, we are excited to be entering Mexico with [a 50% equity investment in Mexico's Home & More, S.A. de C.V.]
Following, too, in the footsteps of a veritable parade of U.S. corporations expanding south of the border: Everyone from pharmacist Pfizer to automakers GM
Hey, if everybody else is doing it ...
What management does:
And honestly, it's hard to imagine Bed Bath will do any worse in Mexico than here at home, where margins have been slumping for as long as I can remember. Granted, things aren't quite as bad as at Pier 1
|
11/06 |
3/07 |
6/07 |
9/07 |
12/07 |
3/08 |
|
|---|---|---|---|---|---|---|
|
Gross |
43.1% |
42.8% |
42.7% |
42.5% |
42%% |
41.5% |
|
Operating |
14%% |
13.4% |
13.2% |
12.9% |
12.5% |
11.9% |
|
Net |
9.3% |
9%% |
8.8% |
8.7% |
8.4% |
8%% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
So just how bad are things at Bed Bath? Well, as of the end of last fiscal year, management was predicting something in the neighborhood of a 10%-15% decline in earnings this year -- call it $1.80 in per-share profits, give or take. That's assuming the U.S. economy doesn't worsen, and that comps are no worse than "slightly negative" this year.
If all goes well, therefore, we're currently looking at a stock priced at approximately 16 times this year's earnings. Analysts expect it to grow at a little over 12% per year going forward. Seeing as Bed Bath doesn't even pay you a dividend to wait around and see how things will work out, that doesn't look to be a particularly attractive valuation. Unless and until management tells us things are looking up, therefore, I'd consign this stock to the "great Beyond."
If that's the case, though, then why does Fool co-founder, Motley Fool Stock Advisor co-advisor, and all-around investor extraordinaire Tom Gardner argue that Bed Bath is a "Great buy"? Read Tom's midyear update on Bed Bath and all his other stock picks (for free!) and find out.
