Bed Bath and Beyond outlook is not so bullish

The firm will release its first-quarter numbers on 24 June, and its struggling share price is a reflection of the retail sector.

Bed Bath & Beyond
Source: Bloomberg

Year-to-date, the share price of Bed Bath & Beyond is down over 8%. The final-quarter numbers – along with the full-year figures – in February were unimpressive, and the outlook the company gave wasn’t exactly glowing either. The wider US retail sector had a difficult 2015, and the weather is to blame. This wasn’t the first time that excuse was rolled out, and it probably won’t be the last.

As I previously stated, the company has been improving its customer services levels, and its online business has improved after investments were made, but the consumer confidence levels are low across the board.

As the company’s specialises in big ticket items for households it is difficult to get ahead when shoppers are savvy. The weak consumer environment has its benefit to Bed Bath and Beyond, as it makes the prospect of an interest rate rise from the Federal Reserve less likely, and rock-bottom interest rates will continue to push the US housing market – which is showing strong growth.

When Bed Bath and Beyond reports its first-quarter figures, the market is expecting revenue of $2.74 billion and earnings per share of 94 cents. The fourth-quarter numbers came in below market expectations, and the revenue was $3.33 billion and EPS came in at $1.8, and dealers were anticipating $3.36 billion and $1.8.

The company will reveal its full-year numbers in April 2016, and the market is expecting revenue of $12.27 billion, and EPS of $5.27. These forecasts represent a 3.2% rise in revenue a 4% increase in EPS.

Equity analysts are bullish on Bed Bath and Beyond, and out of the 27 recommendations, seven are buys, 15 are holds, and five are sells. The average target price is $74.67, which is 7.1% above the current price.

The number of short positions being taken out on Bed Bath and Beyond has increased by 16% since the company reported its full-year numbers in April. The short interest on the stock is at a seven-month high.

The share price has been in decline since February, and the next level of support will be found in the $66 region. Any moves higher will encounter resistance at $71 and $73. 

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