Bed Bath & Beyond has churned out double digit top line growth over the past three quarters, helping it move up to the sixth position on Consensus Advisors' 2009-2010 Retailer Health Ratings, just behind Wal-Mart and CVS.
Following its strong first quarter report last week, Credit-Suisse analyst Gary Balter in a note referred to the home furnishings retailer as "a very well-positioned company, in control of its own destiny, facing no direct competition."
In its first quarter ended May 29, earnings climbed a better-than-expected 58 percent, helped by a rebound in spending for home furnishings and market gains as Linens n' Things closed its stores last year. Revenue grew 14 percent to $1.92 billion and ran up 9.4 percent on a same-store basis, outpacing the industry. Gross margins improved 450 basis points, partly due to efforts to reduce couponing in recent quarters, which has also lowered advertising costs. On a conference call, management reiterated that it sees the potential for another 400 Bed Bath stores in the U.S. and Canada.
"We have to keep doing the same things we've done right all along, because it's hard to predict what's coming up in the future," co-Chairman Leonard Feinstein told The Record in North Jersey last week following the company's annual meeting. "What we've got to do is be diligent in terms of taking care of the customer, staying in stock, making sure there are not lines at the register -- doing what we hope are those extra special things that aren't being done elsewhere."
While it raised its outlook for the year, shares fell last week after Bed Bath & Beyond lowered its second quarter earnings guidance slightly below Wall Street's targets, apparently due to economic concerns. "While the economic environment appears to be showing some signs of stabilizing, it appears the consumer continues to face economic challenges, and the pressures of the macroeconomic environment persist," said Mr. Feinstein on the conference call.
Shares of home furnishing retailers, including Williams & Sonoma and Pier 1 Imports, as well as DIY chains, are also said to be under pressure in recent weeks over concerns that the expiration of the U.S. government's homebuyer tax credit could hinder a housing recovery.
However, speaking to The Record, Warren Shoulberg, editor in chief of Home Furnishings News, said Bed Bath & Beyond "continues to totally outclass anybody else in the home business."
While winning the war against Linen n' Things, the chain has also fared well against Wal-Mart and Target. Both discount giants expanded their housewares and linens offerings several years ago, but their efforts have been frustrated by merchandise miscues.
"They were all going after Bed Bath's business," Mr. Shoulberb said. "But neither one of them has figured it out yet."
Discussion Questions: What do you think of Bed Bath & Beyond's competitive strength in the marketplace? Why have some of the larger discounters apparently struggled in the housewares category?
- Bed Bath optimistic about the long term - The Record
- Bed Bath & Beyond 1Q Profit Up 58%; 2Q View Below Street - The Wall Street Journal
- Amazon.Com Ranked No. 1 Financially Healthiest Retail Company For Second Year In A Row In Consensus Advisors' Retailer Health Ratings - Consensus Advisors
- Bed Bath & Beyond Q1 beats Street; sees lackluster Q2 - Reuters