Ahead of the Tape: Why Contrarians Won't Clean Up in Bed Bath & Beyond -- WSJ
April 05 2017 - 3:02AM
Dow Jones News
By Steven Russolillo
It isn't easy finding a stock that is hated more than Bed Bath
& Beyond Inc.
Only two of the 27 analysts who cover the struggling home-goods
retailer recommend investors buy the stock, according to FactSet.
Considering how lopsidedly optimistic analysts can be, that is even
starker than it seems. Just 13 S&P 500 companies garner a lower
proportion of "buy" recommendations.
Bearish analysts are often a great contrarian indicator, but
investors shouldn't be tempted to zig while analysts zag on this
stock. From shriveling margins to weak same-store sales, the
negativity is justified heading into Bed Bath & Beyond's
earnings report on Wednesday.
Those same analysts estimate fiscal fourth-quarter earnings of
$1.77 a share, down 4.3% from a year ago. Revenue for the period
ending in February is expected to have ticked up by 2.4% to $3.5
billion. Same-store sales, which have dropped in four of the past
five quarters, are expected to edge 0.3% higher.
Bed Bath & Beyond, which sells everything from bedding and
kitchen appliances to coffee makers and vacuums, has been slow to
adapt to Amazon.com Inc.'s increasing dominance. It has suffered
from changing shopper habits and been hurt by the downturn weighing
on many traditional brick-and-mortar retailers.
Late to the e-commerce game, Bed Bath & Beyond is now
investing heavily in its online presence and experimenting with a
new membership model. As a result, the company's already depressed
margins have been squeezed further as it sells more online.
While many retailers including Macy's Inc., J.C. Penney &
Co. and Sears Holdings Corp. have taken the difficult step of
closing a significant number of stores, Bed Bath & Beyond has
bucked the trend. It operates 1,541 locations across its brands, up
from 1,496 three years ago.
"It's not that we are trying to get bigger or there's nothing
about ego here," Bed Bath & Beyond's Chief Executive Steven
Temares said on an earnings call in December. "It's all about being
better...I mean, we'll close stores when they make sense to close
them."
It is a move investors and analysts might want more than he
thinks. Shares are already down 20% over the past year and have
lost half their value since early 2015.
Earnings typically don't provide investors much relief either.
The stock, which currently trades near its lowest level since
September 2010, hasn't had a double-digit percentage jump in the
day following an earnings report in at least the past five
years.
Roughly one-quarter of Bed Bath & Beyond analysts have
"sell" ratings on the stock. That is high; only 6% of all analyst
ratings on S&P 500 companies are sells.
For once, though, Wall Street looks like it has a popular call
right.
(END) Dow Jones Newswires
April 05, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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