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

DanielGMask

  • Full Member
  • ***
  • Posts: 133
    • How to Be Millionaire
BBBY - Bed Bath & Beyond
« on: July 09, 2014, 08:01:11 AM »
I've noticed there's no thread for BBBY and I'm interested in the company. What do you guys think about this one? Do you know of any articles or valuation analysis out there? Greetings ;-)
You should follow me on twitter @DanielGMask


dwy000

  • Sr. Member
  • ****
  • Posts: 457
Re: BBBY - Bed Bath & Beyond
« Reply #1 on: July 09, 2014, 09:53:21 AM »
I wondered when someone would throw this up as a category.

There's a whole lot to like at today's prices.  The company has zero debt, throws off prodigious amounts of free cash flow (like $600-$800M per year) and uses it entirely to repurchase debt.  While they've been clobbered for missing estimates, same store sales continue to grow (albeit more slowly than planned).

The margins have taken a hit recently as they've had to increase couponing to keep the customer flow.  In addition the inventories took a surprising step up this year without much justification.  They've been investing heavily in the distribution and online capacity which has hurt free cash flow a bit.

But overall this is a pretty well managed company in a tough, tough segment.  The balance sheet is rock solid and they have been very shareholder friendly.  Even if growth stops and they just milk cash flow for a few years it's hard to see how today's price isn't a floor with lots of upside if they can stabilize margins and get back to slow but steady growth.

dwy000

  • Sr. Member
  • ****
  • Posts: 457
Re: BBBY - Bed Bath & Beyond
« Reply #2 on: July 09, 2014, 09:54:12 AM »
Typo - they repurchase shares not debt (there is no debt).

xxx1313

  • Newbie
  • *
  • Posts: 48
Re: BBBY - Bed Bath & Beyond
« Reply #3 on: July 09, 2014, 09:55:51 AM »
German value boutique ACATIS bought some BBBY stock in June:

"Purchases in the international equity funds
Bed Bath & Beyond: Bed Bath & Beyond is an American
retailer which offers particularly furnishings in the
areas of bathroom, bedroom, kitchen and dining room. The
share price has come under pressure after increased investment
in the expansion of the online business, which resulted in a decrease in operating
margin. We consider the decline as
only temporary and expect higher margins in the medium term. The rating is currently at an historic low (PER 2015e 11.5)."


frommi

  • Hero Member
  • *****
  • Posts: 1075
Re: BBBY - Bed Bath & Beyond
« Reply #4 on: July 09, 2014, 10:28:09 AM »
Is it possible that IKEA is starting to get a part of BBBY business?
I know IKEA from europe where its nearly the only good lowcost furniture shop available and it looks like they have an expansion plan running in the USA.

But nontheless BBBY is a great company, i can`t really see if IKEA is a threat or not, that was just my first thought when i looked at the last numbers.



dwy000

  • Sr. Member
  • ****
  • Posts: 457
Re: BBBY - Bed Bath & Beyond
« Reply #5 on: July 09, 2014, 10:49:42 AM »
There may be overlap with IKEA at the very edges but I think it's a different market.  BBBY doesn't sell furniture - it's where you go for a new coffee maker, sheets and to stock up your kid's dorm room.  It's brand names.  IKEA sells some of this stuff but largely as an adjunct to their furniture.

The bigger competition is from Target and JCPenney and such (plus online thru Amazon).

HJ

  • Sr. Member
  • ****
  • Posts: 425
Re: BBBY - Bed Bath & Beyond
« Reply #6 on: July 09, 2014, 12:47:25 PM »
Even if one were to view IKEA as a comp to this business, it should be viewed as a pretty good comment about the profitability of this particular retail category that it can spring forth one of the richest guy in the world (as opposed to the retail category of books or electronics, which has been destroying wealth ever since the advent of Amazon).

The proper comparison is probably more William Sonoma (WSM) and Container Store (TCS), which just announced bad numbers today.

I'm no expert on retail, and am interested in learning more.  Purely on valuation, this looks pretty cheap.  At 7.5x pretax, it trades like a capital intensive commodity chemicals business, when it has no long term debt (other than operating leases) and 40% gross margin.  For what it's worth, I compiled the following future lease obligation metrics as an attempt to quantify their real estate operation.  As you can tell, they are doing very different things than either William Sonoma or Container.  Not a mall based retailer.

                                  WSM                   Container   BBBY
Future  Lease Obligation    1,431,599     493,731                  3,591,932
Store Count (end of yr)    585                    63                  1,496
Sqr footage                   5,838,000     1,100,000    42,619,000
Lease / Store                   2,447                    7,837                   2,401
Lease /  Sqr Ft                   245.22                    448.85                   84.28

I think one of the big question is whether the current lull is more cyclical (weather, product cycle, slow economic growth 1st half) or secular (Amazon, internet, or just losing share to WSM).  It feels like they attract a "lower rung" of customer than the comps.

DCG

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1552
    • Venture Blend
Re: BBBY - Bed Bath & Beyond
« Reply #7 on: July 09, 2014, 12:53:45 PM »
I don't think Ikea is a good comparison.


I'd think Amazon would put a much bigger dent in their business than Ikea.

HJ

  • Sr. Member
  • ****
  • Posts: 425
Re: BBBY - Bed Bath & Beyond
« Reply #8 on: July 09, 2014, 01:10:00 PM »
I don't think Ikea is a good comparison.


I'd think Amazon would put a much bigger dent in their business than Ikea.
I think that's the fear.  The question is is it already in the price?

Phaceliacapital

  • Hero Member
  • *****
  • Posts: 1004
Re: BBBY - Bed Bath & Beyond
« Reply #9 on: July 09, 2014, 01:22:28 PM »
The harder you work, the luckier you get.