If Bed Bath & Beyond is Warning, Who's Next? (BBBY)

Bed Bath & Beyonds (BBBY-NASDAQ) is apparently feeling the same consumer pinch as elsewhere, it guided $0.36-0.38 EPS versus $0.39 estimates and guided same-store-sales for the quarter down to up 1.6% from a prior 3% to 5% range.

Steven H. Temares, CEO stated, "Based upon what we have experienced and has been reported by others, the overall retailing environment, especially sales of merchandise related to the home, has been challenging. The efforts of our associates and their ability to execute remain at high levels. We continue to base our decisions upon what is necessary to achieve our long-term objectives. While we did not achieve all of our financial goals during our initial fiscal quarter of 2007, we remain optimistic that this year will be our best ever."

Here is the problem though: Even though this company has been dead money, it rarely has to issue an outright warning and rarely misses its targets (even if because of crafty guidance management).  Shares closed down marginally at $40.47 on Monday and have been mostly in a $35.00 to $45.00 trading range for most of the last 4 years after a meteoric rise in the 1990’s.  If you’ve ever been in a Bed Bath & Beyond, you’ll know that this is the ultimate ‘nesting’ shop and if Bed Bath & Beyond is seeing a fall-off then there are others behind it. 

If its gets cheap enough this might start to look attractive to private equity on a cashflow and earnings ex-Cap-ex and on an EBITDA basis, but if they are going to slow too much then it may be a while before this starts to make sense.  This may take out some near-term private equity speculation in the retail and ‘nesting’ plays.

Jon C. Ogg
June 5, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.