E Bed Bath & Beyond: A Retail Tale Of The Walking Dead

Online sales won’t make or break Bed Bath & Beyond as has been proven in recent years.What will make or break the retailer is its business model and brick and mortar concept that has been left unchanged for decades. Amazon.com (AMZN) won’t and hasn’t killed Bed Bath & Beyond. Every retailer of scale will and has achieved a piece of the e-commerce business over the last decade or so. Bed Bath & Beyond’s problem is like-products at relatively cheaper prices found at discount retailers such as Target (TGT) and Wal-Mart (WMT). And with these two retailers having more than quadruple the retail footprint of Bed Bath & Beyond, the math simply doesn’t work out well for the much smaller retailer. Where Bed Bath & Beyond might have one store in a major metropolitan area, Target may have up to 3 storefronts, Wal-Mart as many as 5 storefronts. The consumer has to have a dedicated reason, a decision to spend more in order to drive to that solitary Bed Bath & Beyond location while surpassing Target and Wal-Mart. Bed Bath & Beyond has a concept and retail footprint problem that is extremely difficult to address in the 1st century. Remember Service Merchandise? Let’s hope Bed Bath & Beyond can revive itself from the Walking Dead status. Unfortunately, few have in the past, especially those with such a specific product assortment.

Many analysts have reduced their expectations for shares of BBBY going forward. Given that most still reflect a bottoming in 2017 and a $40+ price target, it doesn’t seem as though the analysts are appreciating history or metric declines in perpetuity. In most every single analyst report I’ve read since Bed Bath & Beyond’s issuance of Q3 2016 results, none provide a reasonable solution to the ails of the business or reasoning for a bottoming in profits. 

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Disclosure: I am short UVXY/TVIX.

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