Summary
Bed Bath & Beyond had a lackluster second quarter, to say the least.
The saturated market for its products make it a rather weak spot in retail.
It's clear that management is having problems, and it just seems better to look for other stocks in retail.
Bed Bath & Beyond (BBBY) is taking heat today after reporting a less than pleasant second quarter. I don’t see the appeal of the stock, given the ample competition with better financial results. There are better investments out there that aren’t down 22% post earnings. Their sales were stagnant, and costs were up. But this isn’t anything new. The company and share price have been struggling for years. In my opinion, BBBY will likely not come back from its issues in the foreseeable future. There are so many brands within their field of business that offer substitute goods. If you can buy a bath rug on your way out of Walmart (WMT) for $10, why would you go to Bed Bath & Beyond? BBBY doesn’t create the “one stop shop” appeal that many are looking for in retail these days. The lack of diversification and competitive edge is only exacerbated by the company’s failure to create meaningful online sales. The difference between this company and others like Macy’s (M) is the adaptation that has been made, as well as diversified offerings.
Analysts were making negative calls on this stock last year, citing the fact that rivals were investing more in their stores and working to create a balanced online presence. I still think the problem lies in the undiversified nature of their business. “Home Goods” alone are not enough to support a company. Target (NYSE:TGT) has home goods. Walmart has home goods. TJX Companies (TJX) has a huge array of home goods through both stores “Home Goods” and TJ Maxx. They’re simply operating in a segment that is hyper competitive with many players. As Buffett would say, they don’t have a “moat” around their business.
