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Bed Bath & Beyond Inc BBBY

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Core Business Focus Positions Bed Bath & Beyond for Improving Cash Flow Metrics Ahead; Shares Rich

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We plan to raise our $22 fair value estimate for no-moat Bed Bath & Beyond by a high-single-digit rate after lifting our full-year 2021 sales outlook from $8.0 billion closer to the firm’s updated guidance of $8.2 billion-$8.4 billion. The primary change is higher same-store sales expectations over the last three quarters of the fiscal year as the firm now expects them to rise at low-single-digit rates, better than a flattish initial outlook and lapping 4% average comps over the back three quarters of 2020. It’s clear that Bed Bath is on an improving cash flow trajectory, helped by better mix and merchandising, as evidenced by an adjusted gross margin in the quarter that expanded 820 basis points to 34.9% from last year (up 40 basis points over the first quarter of 2019). But the adjusted operating margin remains depressed on an absolute level, coming in at 1.1%, down from the 1.9% Bed Bath delivered in the same period of 2019.

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Company Profile

Business Description

Bed Bath & Beyond is a home furnishings retailer, operating around 1,000 stores in all 50 states, Puerto Rico, Canada, and Mexico. Stores carry an assortment of branded bed and bath accessories, kitchen textiles, and cooking supplies. In addition to 818 Bed Bath & Beyond stores, the company operates 132 Buy Buy Baby stores and 54 Harmon Face Values stores (health/beauty care). In an effort to refocus on its core businesses, the firm has divested the online retailer Personalizationmall.com, the One Kings Lane business and Christmas Tree Shops and That (gifts/housewares), Linen Holdings, and Cost Plus World Market.

Contact
650 Liberty Avenue
Union, NJ, 07083
T +1 908 688-0888
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings May 31, 2021
Fiscal Year End Feb 27, 2022
Stock Type Distressed
Employees 37,600

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