Bed Bath & Beyond (Nasdaq: BBBY) shares got a beatdown after the company reported quarterly results last week. Should you be a contrarian, and buy Bed Bath & Beyond stock on this pessimism? This Fool doesn't think so.

Bed, bath, bummer
Bed Bath & Beyond's big bummer last week was its weak guidance compared to analysts' expectations. The retailer said that in the upcoming quarter, it will report earnings of between $0.59 per share and $0.63 per share (versus analysts' expectation for $0.64 per share). For the full year, it expects earnings to grow 15%, to $2.65 (versus analysts' expectation for $2.70 per share).

Investors should always take analysts' expectations with a grain of salt, and sometimes, disappointments like this one can yield bargains for long-term investors. However, in this retailer's case, negative macroeconomic forces could impair its growth.

Consensus Advisors recently compiled a list of the "healthiest retailers." I agree that some names on the list are attractive, including Amazon.com (Nasdaq: AMZN), Urban Outfitters (Nasdaq: URBN), Aeropostale (NYSE: ARO), and Buckle (NYSE: BKE). All are nimble retailers with strong brands and solid balance sheets. But I don't think Bed Bath & Beyond deserves its spot alongside such robust company.

Bed Bath & Beyond sells merchandise widely available at ubiquitous, powerful, bargain-oriented retailers like Wal-Mart (NYSE: WMT) and Target (NYSE: TGT). Although Bed Bath & Beyond is a frequent sight on the retail landscape, its brand just isn't that strong. In these economically challenging days, investors should seek out the safety of the strongest brands.

Consumer spending has shown increasing signs of flagging, despite a brief burst of spring fever several months ago. I've also seen reports of what may be desperate clearance sales at retailers in June. There's a slowly dawning realization that the housing market's little remaining strength owed primarily to the new-homebuyer tax credit. That means Bed Bath & Beyond could face challenges to growth on the horizon.

Go for cheaper and better
Is Bed Bath & Beyond even all that cheap? A glance at comparable retailers suggests that you can get an ultimately stronger stock for a similar multiple:

Company

Forward P/E

PEG Ratio

Share Appreciation, Last 12 months

Bed Bath & Beyond

14.0

1.20

26%

Wal-Mart

12.1

1.17

4%

Target

12.6

0.99

28%

Source: Yahoo! Finance on June 28, 2010.

Bed Bath & Beyond is priced a hair more richly than Wal-Mart and Target. I'd argue that both of those retail rivals are better stock ideas, because they have superior brands and slightly cheaper multiples.

Meanwhile, analysts may not be properly assessing Bed Bath Beyond's anticipated growth, should the brutal reality of a double-dip recession occur. That possible economic snag could make Wal-Mart the best idea at the moment, since it's got major bargain-hunting cachet with consumers.

But Bed Bath & Beyond does have a strong balance sheet, with $1.6 billion in cash (or about $6.30 per share) and no debt. That cash cushion does give it some safety, even if the already-fragile economy turns super sour. Still, the retailer would still need to figure out how to drum up additional growth if customers forsake it for competitors such as Wal-Mart.

Last but not least, Bed Bath & Beyond doesn't pay a dividend; Wal-Mart and Target do, again showing why those two big-box retailers might be a better bet. All in all, I think investors should leave Bed Bath & Beyond behind, and seek out greener pastures.

Looking beyond Bed Bath & Beyond?
What's your take on this retail stock? Do you think Bed Bath & Beyond is a buy, or are you looking at shares of Wal-Mart and Target (or some other stock) instead? Sound off on retail stocks you're interested in buying in the comment box below.

Wal-Mart is a Motley Fool Inside Value recommendation. Amazon.com and Bed Bath & Beyond are Motley Fool Stock Advisor selections. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Urban Outfitters. The Fool has a disclosure policy.