Analysis of Bed Bath & Beyond (bbby)

Bed Bath & Beyond (BBBY) is a store that we are all familiar with today. Bed Bath & Beyond started out with a bang in 1971 and has continues to expand since then. Recently, BBBY has had some serious competition especially in the e-commerce platform. I have done extensive research on the company to be able to give an investment recommendation. I will begin with research on the company, its history, risks, and their plans for the future.

Bed Bath & Beyond is a large scale retailer of home goods. The company has many subsidiaries including Christmas Tree Shops, Harmon, Harmon Face Values, buybuy Baby. Bed Bath & Beyond sells domestics merchandise such as bed linens, bath items… and home furnishings such as basic housewares, tabletop items, kitchen items…. Bed Bath & Beyond sells its products in stores and online / mobile devices. They have 1,530 stores located in the US, District of Columbia, Puerto Rico, and Canada, and they have a website too (Reuters.com). The corporate headquarters are located in Union, New Jersey. Steven H. Temares has been the CEO of BBBY for the past two years, and he has been with the company for 13 years (Forbes.com). Currently, BBBY has 65,000 employees.

Bed Bath & Beyond first opened on October 5, 1971. The company was started by Warren Eisenberg and Leonard Feinstein in New York and New Jersey. The timing was right for the industry and the stores continue to expand, eventually going public in 1992. It continued to expand, eventually incorporating an online store and purchasing some of its subsidiaries.

Bed Bath & Beyond’s primary industry is the retail industry, specifically in the home furniture and housewares stores. Some competitors of Bed Bath & Beyond in the home furnishing departments are Appliance Recycling Centers of America, Inc., At Home Group Inc., The Container Store, and Williams-Sonoma Inc.

BBBY’s earnings for the first quarter of 2018 were less than in 2017. This caused their stock price to decrease dramatically as people got nervous about their future earning potential. There were many causes for the dip in EPS. First, BBBY is competing with Amazon and other large competitors. Next, BBBY is also in the process of expanding their stores and online store. BBBY’s large discounts and promotions also contributed to the low EPS this quarter. Last, BBBY offered a new membership called “Beyond +” in 2017. For $29 a year, members can enjoy free shipping on all purchases and 20% off every purchase. This increased the costs for BBBY and their margins decreased even more. BBBY has been trying to keep up with the ever changing retail industry but their plans are failing.

BBBY has some risks that they face for the future. First, they have economic risks that they cannot control such as tax rates, inflation, deflation, unemployment trends, interest rates, etc. Second, they face risks of competition in the retail industry and advancements in technology (sec.gov). This includes unanticipated pricing and practices, for example cheaper thresholds for free shipping. Third, BBBY has the risk of failing to anticipate and adapting to changing customer preferences (sec.gov). If BBBY cannot anticipate and adapt to these changes, consumers won’t be interested in the merchandise BBBY is selling. Fourth, they face the risk of unusual weather patterns. Last, BBBY is at major risk if their IT systems break down for a substantial amount of time. These are the risks that BBBY list as the worst possible things that could happen to BBBY, and these are the things they have to look out for and avoid.

In BBBY’s 2017 letter to shareholders they spell out their strategic plan they aim to reach in 2020. This plan has many different goals but the main goal is to make themselves superior in every part of their business, in store and online. The first part of the plan is about how BBBY wants to differentiate themselves by having the largest assortment of merchandise for every part of the home. Second, BBBY’s merchandise will be the “best in class” and will use pricing specialists to determine pricing. Third, BBBY will offer membership services. This third part was implemented this year with the “Beyond +” membership. Last, BBBY aims to have superior customer service experience online and in store, making the customer’s buying process enjoyable and stress-free.

In conclusion, BBBY has been a huge success in the department store industry for many years, but recently they have hit some road bumps. Customers now prefer to purchase home goods and furnishings online and stores like Amazon are huge competition for BBBY. Next, I will calculate and analyze the financial ratios of BBBY to get a better idea of how they are performing financially.