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Bed Bath & Beyond Earnings: An Early Look

By Dan Caplinger - Apr 7, 2013 at 3:20PM

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Will the big-box home retailer stay on top?

Spring is finally here, and a new earnings season is right around the corner. Next Wednesday, Bed Bath & Beyond (BBBY -1.49%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Bed Bath & Beyond has become the preeminent big-box retailer specializing in home furnishings and accessories, having beaten out former rival Linens 'n Things in the bricks-and-mortar portion of the industry. Yet like most retailers, online competition is a big threat. Let's take an early look at what's been happening with Bed Bath & Beyond over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Bed Bath & Beyond

Analyst EPS Estimate

$1.68

Change From Year-Ago EPS

13.5%

Revenue Estimate

$3.39 billion

Change From Year-Ago Revenue

24%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can Bed Bath & Beyond bring home great results?
Analysts have been resolute in their views on Bed Bath & Beyond recently, as they've kept their consensus estimates for the retailer's quarterly earnings stable and kept their full-year views for fiscal 2013 and 2014 close to unchanged. The stock, however, reflects more optimism among investors, with the shares having gained 14% since the beginning of 2013.

Bed Bath & Beyond stands to benefit from the upturn in the housing market that we've seen recently. Already, rival Williams-Sonoma (WSM 9.34%), which operates the higher-end Pottery Barn home-furnishings chain, reported extremely strong sales, with its West Elm division showing the strongest results. With Pier 1 (PIRRQ) also having shown signs of benefiting from the booming market, Bed Bath & Beyond should finally enjoy some macroeconomic tailwinds to support its results.

Many point to home furnishings as an area that's resistant to online competition, as showrooming for basic household items doesn't intuitively seem to carry much benefit. But a recent study on showrooming shows that the online threat to Bed Bath & Beyond is very real. The study listed Bed Bath & Beyond as the retailer most at risk of falling prey to Amazon.com (AMZN 3.60%). With Amazon's having developed a smartphone app that lets you immediately see comparable online prices for goods you scan at stores, Bed Bath & Beyond will have to keep prices at least close enough to limit customers' incentive to wait for an online delivery.

Still, Bed Bath & Beyond has a strong management team that won't cave in to Amazon without a fight. The acquisition of Cost Plus last year helped bolster its presence in the home-furnishings market, but Bed Bath & Beyond has also recognized the need to follow some of its retailing peers in coming up with a better online strategy of its own to counter competitors' efforts to steal its business.

In its quarterly report, watch for Bed Bath & Beyond to give details on how it plans to fight Amazon in the online area. Also, if Bed Bath & Beyond finally starts paying a dividend as some expect, it could give investors another reason to get excited about the stock going forward.

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Stocks Mentioned

Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$4.64 (-1.49%) $0.07
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$113.50 (3.60%) $3.94
Pier 1 Imports, Inc. Stock Quote
Pier 1 Imports, Inc.
PIRRQ
Williams-Sonoma, Inc. Stock Quote
Williams-Sonoma, Inc.
WSM
$123.35 (9.34%) $10.54

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

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