Bed Bath But Not Beyond Hope

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About: Bed Bath & Beyond Inc. (BBBY)
by: Stephen Percoco, CFA
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Summary

BBBY has lost 70% of its peak value. Profits are down mostly due to price competition. Store comparable sales have been falling mid-single digits, offset by growth in digital.

Management is seeking to grow revenues in key products, increase store traffic, deleverage gross margin and SG&A expenses, reduce lease costs, upgrade digital offerings and improve working capital management.

Management’s guidance and goals suggest that EPS will decline through fiscal 2019 but at a slowing rate.

At 9 times 2018 EPS and 10 times 2019 EPS, BBBY trades at a discount to peers.  My price target of $30, assumes a return to EPS growth in 2020.

The stock has an attractive and reasonably safe 3.2% dividend yield.

Recent stock performance vs. benchmarks

Specialty retailers have been strong relative performers so far in 2018. The S&P Retail Select Industry Index posted a total return of 8.28% through June 29, better than the S&P