Bed Bath & Beyond: Revised to $69, Earnings Miss Weighs on Stock

Bed Bath & Beyond (NASDAQ:BBBY) recently reported Q3 results with net sales of $2.3 billion, a 6.8% over the previous quarter. The company missed  consensus analysts’ sales estimate by approximately 0.4%, according to Thomson Reuters. Its share price has witnessed a decline of approximately 6% after the earnings announcement on Decemeber 21. Bed Bath & Beyond competes with specialty retailers like Williams-Sonoma, IKEA, Pier 1 Imports and with large retailers like Wal-Mart (NYSE:WMT), Target (NYSE:TGT).

We have revised our price estimate for Bed Bath & Beyond to $69, implying a premium to the current market price. We have revised our balance sheet numbers and majority of our estimates were in line with company results and guidance.

See Full Analysis for Bed, Bath and Beyond

BBBY’s Q3 Results and Beyond

Bed Bath & Beyond has reported impressive Q3 numbers amidst the volatile economic environment. Increases in both the number of transactions and the average transaction amount drove the comp sales in Q3, which witnessed an increase of 4.1%. The company has also raised its full year earnings estimate in anticipation of solid Q4 results.

We believe Bed Bath & Beyond’s strategy of decentralized management of stores wherein individual store managers can stock their stores according to local needs and preferences has worked really well for the company. This leads to more appropriate stocking of inventory as per local customer needs and ensures a better shopping experience for customers.

However, the company remains susceptible to volatile economic conditions as the housing and employment data in the U.S. remain weak. This is likely to affect the overall home furnishing retail industry. We are optimistic about Bed Bath & Beyond as it has remained profitable in the recent economic crisis.

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