BBBY - Bed Bath & Beyond

[DanielGMask]

I’ve been a shareholder for years and on this one I’m down a lot! I think these are the 4 more likely possible outcomes (or a combination):

 

1) They continue to do more of the same and margins continue to get worse until they either become a much more smaller company or go bankrupt.

 

2) They stop the bleeding and stabilize margins during 2018 or 2019.

 

3) They are bought by other company, either in the near future or down the road.

 

4) They manage to become the expert retailer in their niche (as they used to be) and achieve better margins than current ones.

 

I’ve not sold because I think that outcomes 2, 3 and 4 are still probable and I may recoup some of my losses. Their wedding registry service is highly used and if they really achieve an omnichanel platform that’s going to help them maintain an advantage.

 

Having said that, even though the company looks cheap at current prices, there’s no clear recovery path and what seems cheap may even become a cigar butt in a not so distant future.

[EricSchleien]

Why not just take a capital gains loss and use your capital to invest in something with same upside that's just a bit easier. I don't know personally, this just seems too hard for me to get interested in. Many more opportunities that are also cheap but where I see the downside a lot lower.

[DanielGMask]

Why not just take a capital gains loss and use your capital to invest in something with same upside that's just a bit easier. I don't know personally, this just seems too hard for me to get interested in. Many more opportunities that are also cheap but where I see the downside a lot lower.

 

Willing to share some of those opportunities?

 

It’s the first time in 12 years of stock investments that I lose such a big percentage of my original investment and it has been tough to accept the loss and move on before there’s nothing left!

[Spekulatius]

Why not just take a capital gains loss and use your capital to invest in something with same upside that's just a bit easier. I don't know personally, this just seems too hard for me to get interested in. Many more opportunities that are also cheap but where I see the downside a lot lower.

 

Willing to share some of those opportunities?

 

It’s the first time in 12 years of stock investments that I lose such a big percentage of my original investment and it has been tough to accept the loss and move on before there’s nothing left!

 

There are always tax losses left. I would take the tax losses and move on. If you really think, BBBY is unique, you can buy back after 31 days with the tax losses locked in.

[Txvestor]

This looked cheap at 50 and it looks cheap today. The company has bought back a lot of stock

even leveraging its pristine balance sheet a couple of years ago. Obviously management was WRONG

to do that as their business has continued to deteriorate. There has been talk of a private equity buyout for the past 5yrs cuz “its just too cheap to ignore” etc. but alas no such entity has emerged.

The problem with these national bricks and mortar retailers is that they have all these long dates

liabilities like leases etc. that they can’t move nimbly. A slow liquidation of sears has been in progress for over a decade and all sorts of value guys got it wrong. It is sure not easy. If business deteriorates rapidly their margins can get crushed very rapidly. Unfortunately BBBY management has jist been chasing its tail and arguably still doesn’t seem to have a good strategy goong forward. Of all the retailers to my mind they are the one most susceptible to being amazoned.

my past experience with such melting ice cubes and value investing has been nearly universally bad and that is what kept me out of the stock even as it kept popping up on valuation screeners and some 13fs as well.

As hard as it is to sell so far down, you should consider doing it. A question I ask myself when I am so neck deep down is the inverted question. Would I buy here? If the answer is no, then perhaps its your denial thats preventing you selling. .

I recently sold my GE shares in the high teens in such an unfortunate scenario. As painful as it was, seeing it at 13 now makes me realize that I probably did the right thing. The other thing to this is even if these stocks turn around, they seldom if ever start galloping again. You are better served with companies that have secular tailwinds rather than headwinds, these stocks tend to be cigar butts in a best case scenario.

The problem with secular growth stocks however is that they are so dog gone expensive. Its better to try and find the odd one that is mispriced either cuz the matket didn’t recognize it or more often in this expensive market cuz it underestimated its moat or runway ahead.

 

My 2c of course. Certainly not any investment advise.

[CorpRaider]

Yeah, the core seems very Amazonable, with the exception maybe of the registry business, but Buy Buy Baby, One Kings Lane, World Market and Christmas Tree Shops I dunno.  They have just a weird assortment in some of the stores.  Like Christmas Tree shops sells Kcups, why?

 

They are trying out a membership fee program like prime.  I personally don't see that working, at all.  The point about long duration liabilities, I don't know, they've got about 400 stores with leases expiring over the next two years.  That's about 26% of their stores.  Mgmt says this is intentional.

 

I think they were very late to realize the moves needed, but hey maybe they can buy a smaller jet.com and no one will care about profitability or margins and they will be good to go. 

 

I don't invest in retail, but I think I own some as part of a basket via QVAL.  I'm good with that.

[Spekulatius]

This looked cheap at 50 and it looks cheap today. The company has bought back a lot of stock

even leveraging its pristine balance sheet a couple of years ago. Obviously management was WRONG

to do that as their business has continued to deteriorate. There has been talk of a private equity buyout for the past 5yrs cuz “its just too cheap to ignore” etc. but alas no such entity has emerged.

The problem with these national bricks and mortar retailers is that they have all these long dates

liabilities like leases etc. that they can’t move nimbly. A slow liquidation of sears has been in progress for over a decade and all sorts of value guys got it wrong. It is sure not easy. If business deteriorates rapidly their margins can get crushed very rapidly. Unfortunately BBBY management has jist been chasing its tail and arguably still doesn’t seem to have a good strategy goong forward. Of all the retailers to my mind they are the one most susceptible to being amazoned.

my past experience with such melting ice cubes and value investing has been nearly universally bad and that is what kept me out of the stock even as it kept popping up on valuation screeners and some 13fs as well.

As hard as it is to sell so far down, you should consider doing it. A question I ask myself when I am so neck deep down is the inverted question. Would I buy here? If the answer is no, then perhaps its your denial thats preventing you selling. .

I recently sold my GE shares in the high teens in such an unfortunate scenario. As painful as it was, seeing it at 13 now makes me realize that I probably did the right thing. The other thing to this is even if these stocks turn around, they seldom if ever start galloping again. You are better served with companies that have secular tailwinds rather than headwinds, these stocks tend to be cigar butts in a best case scenario.

The problem with secular growth stocks however is that they are so dog gone expensive. Its better to try and find the odd one that is mispriced either cuz the matket didn’t recognize it or more often in this expensive market cuz it underestimated its moat or runway ahead.

 

My 2c of course. Certainly not any investment advise.

 

I agree with above. I think it is fooolish to invest before signs of a turnaround are seen. a the turnaround does not look likely either and if margins keep on shrinking and SSS falling, I don’t see why the shares should stop be falling either. Turnaround are tough, especially in retail. I wouldn’t bet on it, unless you have some clear insight why this one will.

[Foreign Tuffett]

Anyone besides me bottom-fishing here?

 

At some point an activist is going to step in and (rightly) call for the CEO's head.

 

Balance sheet is strong by retailer standards. Whoever was CFO when they issued all those senior notes deserves a gold star.

[Gregmal]

I think this has a pretty good shot at going private in the next 12 months. While things are bad, I don't think they are SHLD terrible. Optically it's very cheap. PE could and should run with this. It's always been a store that appeals to the stay at home mom with discretionary spend, and given where the economy currently is, I think this can stay in the green/black long enough for a competent operator to come in and make some changes.

[mwtorock]

I think this has a pretty good shot at going private in the next 12 months. While things are bad, I don't think they are SHLD terrible. Optically it's very cheap. PE could and should run with this. It's always been a store that appeals to the stay at home mom with discretionary spend, and given where the economy currently is, I think this can stay in the green/black long enough for a competent operator to come in and make some changes.

 

i would second that. really possible for someone to step in and split the company into a couple of pieces.

[dwy000]

I got cut by the falling knife 2 years ago on this and have sat back to watch the outcome.  Impressively, the top line has remained somewhat intact and even though same store sales have been down, I would guess that is largely due to price not volume given the margins continue to contract.

 

The CEO is an old school retailer.  The reaction to everything is to issue more coupons.  The online shift was way too late and way too inadequate.  They seem to be scrambling to react instead of having a long term plan to operate towards.

 

If I hear about margins stabilizing next year one more time from them....

 

 

[flesh]

Anyone following this know why sgandA are going up much faster than rev last few years?

[mwtorock]

Anyone following this know why sgandA are going up much faster than rev last few years?

 

top reason i can think of is couponing and incentives (free/fast shipping, discounts for college students, beyond-plus program, etc). They are also investing in IT, new concepts, etc. gm is also shrinking. basically they are scarifying margins to keep sales number flat.

 

total home furnishing category grow 5% in the US, and they are flat. They are struggling to find their place in the new world. Someone from outside might be better at this stage to lead the turn around.

[DTEJD1997]

Hey all:

 

Anybody still invested or following BBBY?

 

I just noticed it hit a 52 week low today at $13.09.  Trailing P/E is 5.  Forward P/E is about 13 to maybe 5.5?

 

Dividend yield is 4.75%

 

Their debt is now apparently "junk" level.

 

Assuming sales don't totally collapse, and analysts are correct about the upcoming year's earnings...these guys could pay down/pay off debt in about 2 years.  You've got a problem with leases though.

 

Shocking how the mighty have fallen.

 

Wonder if management will be shown the door?

 

Any thoughts?

 

 

[MrB]

Hey all:

 

Anybody still invested or following BBBY?

 

I just noticed it hit a 52 week low today at $13.09.  Trailing P/E is 5.  Forward P/E is about 13 to maybe 5.5?

 

Dividend yield is 4.75%

 

Their debt is now apparently "junk" level.

 

Assuming sales don't totally collapse, and analysts are correct about the upcoming year's earnings...these guys could pay down/pay off debt in about 2 years.  You've got a problem with leases though.

 

Shocking how the mighty have fallen.

 

Wonder if management will be shown the door?

Any thoughts?

About time; main reason we've stayed away is the way they've paid themselves. Not shareholder friendly; very management friendly.

[kab60]

Hey all:

 

Anybody still invested or following BBBY?

 

I just noticed it hit a 52 week low today at $13.09.  Trailing P/E is 5.  Forward P/E is about 13 to maybe 5.5?

 

Dividend yield is 4.75%

 

Their debt is now apparently "junk" level.

 

Assuming sales don't totally collapse, and analysts are correct about the upcoming year's earnings...these guys could pay down/pay off debt in about 2 years.  You've got a problem with leases though.

 

Shocking how the mighty have fallen.

 

Wonder if management will be shown the door?

 

Any thoughts?

I'm not saying this can't work out, but between Sears and Warren Buffetts "can anyone tell me of a retailer turning around" or something along those lines, I think you've been warned. Fwd PE of 13 even sounds expensive. That's like some of the best retail concepts like Autozone I think?

[Foreign Tuffett]

I briefly owned this, but sold for a small loss. I might buy back in if it continues to fall. Here are my thoughts:

 

Pro

Their core categories (home furnishings, towels, sheets, kitchen appliances) aren't in secular decline. IF they can pivot towards a more differentiated assortment they can improve their customer value proposition and stabilize gross margins. 

 

Cheap on TTM metrics

 

Awesomely long-dated and low-cost debt. Balance sheet is in good shape overall for a retailer

 

My understanding is that their non-Bed Bath & Beyond stores are doing OK-ish

 

Should be able to free up some working capital by improving supply chain

 

Con

Management is long on pay and short on good ideas. Capital allocation has been disastrous.

 

The stores are too big

 

Via excessive couponing, management has "trained" its customers to only buy when they can get awesome deals. This has put gross margins under pressure

 

$BBBY is very vulnerable to internet competition because it's core value proposition is (or was) having a larger assortment than the big box or mall-based retailers. The internet's "everything store" blows this model up.

 

Retail has inherent operating leverage and doesn't handle revenue declines well

 

I spent all of 10 minutes in a $BBBY store this week. My thoughts were very similar to the below (no affiliation).

 

https://twitter.com/traderderic/status/1047529698086060034

[Foreign Tuffett]

Hey all:

 

Anybody still invested or following BBBY?

 

I just noticed it hit a 52 week low today at $13.09.  Trailing P/E is 5.  Forward P/E is about 13 to maybe 5.5?

 

Dividend yield is 4.75%

 

Their debt is now apparently "junk" level.

 

Assuming sales don't totally collapse, and analysts are correct about the upcoming year's earnings...these guys could pay down/pay off debt in about 2 years.  You've got a problem with leases though.

 

Shocking how the mighty have fallen.

 

Wonder if management will be shown the door?

 

Any thoughts?

I'm not saying this can't work out, but between Sears and Warren Buffetts "can anyone tell me of a retailer turning around" or something along those lines, I think you've been warned. Fwd PE of 13 even sounds expensive. That's like some of the best retail concepts like Autozone I think?

 

Best Buy

[bookie71]

FYI, They have two stores in Anchorage and are closing one.

[Jurgis]

Since there's a discussion on "what you are buying" thread, I'll add recent anecdotal experience. We went to BBBY store after not going there for half a year or longer. Bought some stuff from clearance bins. Did not have their 20% off coupon - I think they gave up sending them to us. Store was OKish. Clearance prices were around Amazon level. I kinda like their inventory and prices. I think there are still items which we might buy there, but clearly our infrequent visits won't make their business.

[frommi]

The numbers for the quarter were pretty underwhelming in my view, the only positive thing was the guidance for 2$ EPS in 2018, 2019 and EPS growth in 2020. But if i can remember they said that already in past earnings calls. The market sometimes is a strange beast.

[Gregmal]

The numbers for the quarter were pretty underwhelming in my view, the only positive thing was the guidance for 2$ EPS in 2018, 2019 and EPS growth in 2020. But if i can remember they said that already in past earnings calls. The market sometimes is a strange beast.

 

I don't know. I think you nailed it in the other thread. Sometimes, the pendulum just swings too far. Nothing concrete or scientific about it. Just supply and demand compressed over short periods of time, and noticeable to the keen observer. And in this instance, amplified by December's unusual events.

[Spekulatius]

The numbers for the quarter were pretty underwhelming in my view, the only positive thing was the guidance for 2$ EPS in 2018, 2019 and EPS growth in 2020. But if i can remember they said that already in past earnings calls. The market sometimes is a strange beast.

 

That was a good bet. I agree the pendulum has swung too far for a lot of stocks. That’s true for good or bad business. Even ROST went to $76 at the low and is now back to $90. The consumer economy is very strong in the US due to full employment and, tax cuts etc, which is helping retail plays, secular challenged or not. I think next years comps will be tougher.

[frommi]

After reading the earnings call transcript i am under the impression that they really have a strategy to survive the next decade. BEYOND+ is a similar program to Prime, with 20% off prices and free shipping. Just from what i read it looks like they are driving people into this programm to have repeat customers. But this comes at the expense of short term profits, because people just sign into that programm when they do their first larger purchase. But after a year the online coupon is off, giving them much more profit from online purchases while the customer is still hooked into the program. I really like these type of programs as an investor because it widens the moat and gives repeat cashflow. 20% of their sales are already online, so at some point the online sales are the driving force.

Has someone an opinion on BEYOND+ or some first hand experience?

[Jurgis]

We don't use BBBY, TJX, DSW, etc. online at all. Even though we shop TJX and DSW - quite more often than BBBY - in bricks and mortar.