Author Topic: BBBY - Bed Bath & Beyond  (Read 20078 times)

DanielGMask

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Re: BBBY - Bed Bath & Beyond
« Reply #20 on: July 11, 2014, 06:31:58 AM »
I've just read this "also bullish" piece about the company: http://www.valuewalk.com/2014/07/jonathan-booth-on-gm-and-why-bbby-reminds-him-of-brk/
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DanielGMask

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Re: BBBY - Bed Bath & Beyond
« Reply #21 on: July 12, 2014, 06:57:36 AM »
This is getting too crowded, now is Barron's who's recommending to buy the stock in this week's cover story, even suggesting it may be an interesting BRK addition. http://m.barrons.com/articles/SB50001424053111903684104580015193866353332
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dwy000

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Re: BBBY - Bed Bath & Beyond
« Reply #22 on: July 14, 2014, 12:20:22 PM »
$1.5bn bond issuance announced - to fund stock buybacks.  S&P raised rating to A-.

HJ

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Re: BBBY - Bed Bath & Beyond
« Reply #23 on: July 14, 2014, 08:15:28 PM »
The counterpoint to the Barrons article:

http://www.forbes.com/sites/johntobey/2014/07/14/retail-stocks-underperformance-opportunity-warning-or-simply-reality/

The fact that the Barrons article mentions several retail stocks as a group makes me feel a bit better.  It is an interesting exercise to actually compare the operating / valuation stats on the 6 mentioned stocks and think through the valuation issues.  It is also notable that short interest in all of them has increased quite a bit recently.


DanielGMask

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Re: BBBY - Bed Bath & Beyond
« Reply #24 on: July 15, 2014, 02:23:55 AM »
Something to ponder! I think the Forbes piece may explain why what seems to be 1) a real trend and 2) over expansion in many areas, is affecting the whole industry; but I'm not sure it applies to every company within the industry. By the way, the Barron's article also mentions WFM, which I also like!
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jtvalue

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Re: BBBY - Bed Bath & Beyond
« Reply #25 on: July 15, 2014, 06:57:43 AM »
I'll give my 2 cents as a buy-side consumer analyst on Wall Street.  I'm very concerned about the future of retailers.  Depending on the category E-commerce is now 4-20% of the market and is growing 10-15% y/y.  If overall retail is growing 2% that means E-commerce is taking 20% to over 100% of that growth.  If brick and mortar retailers don't generate growth, their margins deleverage as their costs (leases, labor, etc) grow in-line with inflation.  Bed Bath and Beyond currently has 14% OM's while AMZN is currently competing on 1% margins.  Retailers are also leveraged entities, when you adjust for the leases, debt is generally 2-3x EBITDAR.

I highly recommend that anyone investing in retail read this book first. 

http://www.amazon.com/Everything-Store-Jeff-Bezos-Amazon-ebook/dp/B00BWQW73E/ref=sr_1_1?s=books&ie=UTF8&qid=1404998194&sr=1-1&keywords=the+everything+store       

jtvalue, do you ever come across data or study on this specific retail category, i.e. home furnishing online vs. offline, absolute size, the rate of migration, etc?  There are certainly annecdotal evidence that people are doing that.  The question I am really trying to grapple with is what is the rate of that deterioration, measured against the speed of buy back that these guys are doing. 

All the links that I have posted previously are all backward looking, so sure they have been very successful, and we can all pontificate on why they have been successful, but the counterpoint is exactly that all the competition is so far physical.  If people's shopping habbits are changing then all of their previously demonstrable merchandising skills, real estate strategy, etc. simply doensn't really matter to prospective returns.  In your analysis, is there any hope for any kind of physical retail, maybe with the exception of grocery, in the future?  What does the future of physical retail look like?

There is hope for retailers depending on 1) the category they operate in, 2) do they have exclusive control of the brands they sell?, and 3) how they evolve to an Omni-channel strategy. Retailers need great websites and apps that work seamlessly across devices.  They need to be price competitive with online only players.  They need to offer free shipping options, buy online pick up in store, and ship from store capabilities.  They also need to be very disciplined about new store openings and potentially closings. If this means taking down their margins in the near term, so be it.  It's better than losing massive amounts of market share long-term.       

I don't want to talk you guys out of this one as a specific investment.  It's cheap and they have a great long-term track record.  I was just trying to point out the long-term risks in retail in general right now.     
« Last Edit: July 15, 2014, 07:03:53 AM by jtvalue »

HJ

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Re: BBBY - Bed Bath & Beyond
« Reply #26 on: July 15, 2014, 09:20:42 PM »
There is hope for retailers depending on 1) the category they operate in, 2) do they have exclusive control of the brands they sell?, and 3) how they evolve to an Omni-channel strategy. Retailers need great websites and apps that work seamlessly across devices.  They need to be price competitive with online only players.  They need to offer free shipping options, buy online pick up in store, and ship from store capabilities.  They also need to be very disciplined about new store openings and potentially closings. If this means taking down their margins in the near term, so be it.  It's better than losing massive amounts of market share long-term.       

I don't want to talk you guys out of this one as a specific investment.  It's cheap and they have a great long-term track record.  I was just trying to point out the long-term risks in retail in general right now.   

No, I don't think people on this board are that easily influenced one way or another.  I think we all appreciate thoughtful perspectives when thinking through issues that these businesses face and how they impact valuations. 

I'm actually pretty new to retail, but as I have been studying the historical filings for a couple of text book "Amazoned" businesses, BKS and BBY, I increasingly feel like maybe online is not the main "reason" per se that are driving buying away from physical retail, but just a symptom of the fact that those 2 businesses missed or just don't have a "product cycle" in their space, much like an apparel retailers may have missed some important fashion trends. 

Certainly in the case of Best Buy, one theory goes that electronics is a product category that can go online more easily.  But as I reflect on what has happened in that space, I can't help wondering how much has the flat screen TV product cycle changed the category, and more importantly, how much has the rise of Apple changed the landscape of that category.  iPhone replaced so many different electronics gadgets, electronic organizers, cameras, walkman, and then people migrating away from PCs into Macs.  Maybe the greater sin is not that BBY couldn't compete online with Amazon, but that they just had no shot at keeping up with the product cycle of their space, namely Apple products.  In fact, physical retail is so important to Apple, that Apple went into the retail business itself.  Not clear at all that the future of electronics will be all Amazon. 

In the case of BKS, during the years that JK Rowling was pumping out those Harry Potter books, the revenue decline was visibly slower than otherwise.  And it just seems like there hasn't really been a series of books that had the impact those Harry Potter books had since then.  Online paperback doesn't really have the price advantage over physical bookstore these days, but it's absolutely true that in my household we hardly buy books at a physical store anymore. 

Which brings back, in the case of BBBY, to the Kerug coffee machines and Soda Stream.  Green Mountain had annual sales of $4 billion last couple of years, and Soda Stream, $500MM.  I have seen 10% quoted as BBBY's market share in general home furnishing category.  BBBY was an early distributor for both of those, which could have captured significantly more than that share in the early years.  So those 2 product alone could have accounted for something like $450MM +/- of the $11 billion annual sales at BBBY, maybe even more.  As BBBY lose market share in those 2 products, because other stores are now carrying them, that alone could easy explain something like 0.5%-1% of the same store comps.  By the way, on an informal poll of people around me on where they bought their coffee machine, a surprisingly large 60% bought at Bed Bath & Beyond, Target next, and only 2 out of 15 family I asked bought their coffee machine online.  This is clearly not scientific, but my wife tells me for whatever reason she just doesn't really care to buy that from Amazon, but for stuff like books, etc., she doesn't think twice.

Other than piecing together information from company filings, is there other data source that people use to dig out sales information / product cycle type of information?
 

dwy000

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Re: BBBY - Bed Bath & Beyond
« Reply #27 on: September 23, 2014, 01:26:29 PM »
Decent quarterly numbers.  Same store sales up.  $1bn of stock repurchased in 2Q alone.  I continue to believe this is one of the better run and most shareholder friendly retailers out there.

cubsfan

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Re: BBBY - Bed Bath & Beyond
« Reply #28 on: September 23, 2014, 02:21:15 PM »
Decent quarterly numbers.  Same store sales up.  $1bn of stock repurchased in 2Q alone.  I continue to believe this is one of the better run and most shareholder friendly retailers out there.

If I read this right - they bought back almost 10% of their outstanding shares in 1 quarter - amazing!

16.9M shares bought on 198M shares outstanding - 8.5%

zizou

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Re: BBBY - Bed Bath & Beyond
« Reply #29 on: January 24, 2016, 04:53:27 PM »
Curious if BBBY is interesting to other members? They are buying back another $2.5B over the next 3 years.
They look very cheap on cash yield basis. They continue to expand their digital/online presence or contribution.
Admittedly, competition will only get more fierce but they seem very well managed and are holding up pretty well as evidenced by their margins etc.
Balance sheet looks great to me. Management seems very competent and seem to demonstrate commitment to rightsize business and shrink if needed to create value.